Credit Suisse Reinstates E*TRADE Financial With Outperform Rating

Credit Suisse reinstated coverage of E*TRADE Financial Corp (NASDAQ: ETFC) with an Outperform rating following restriction on E*Trade shares due to Credit Suisse's role as an advisor to E*Trade on a recent acquisition.

The brokerage, which raised the price target by $3 to $33, said shareholder value is best served by driving growth via the right strategic acquisition.

"The E*Trade story is at another critical inflexion point — the lack of core business growth resulted in the ouster of the CEO last week; the new management team has effectively been set an implicit target of 2–3 percent incremental business growth or 'we'll consider that this company is better in other people's hand in terms of shareholder value,'" analyst Christian Bolu wrote in a note.

Commenting on the possibility of a takeout by TD Ameritrade Holding Corp. (NASDAQ: AMTD)/Charles Schwab Corp (NYSE: SCHW), the analyst said the acquisition would offer "little to no premium to current prices" due to the lack of a robust strategic rationale and significant revenue dis-synergies.

However, the analyst raised his 2018 estimate to $1.90 from $1.80 to account for the OptionsHouse acquisition. The new price target of $33 is based on his estimate of about $2.00 in long term earnings power and 15x warranted multiple plus about $2.60 per share of DTA.

Shares E*TRADE closed Tuesday's regular trading session at $28.19.

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