ETFC: stock over sold.

Notablecalls is out with summary of the analyst comment on Etrade. Amid the concerns that the company will have a significant writedown on the sub-prime loans, the company share plunged yesterday to less than $4, significantly down from mid-20’s that the share was once trading in the middle of this year. The share price is at this point reflecting the possibility of bankruptcy and the Etrade customers fleeing to other brokerage names such as Schwab and TD Ameritrade. I think although the possibility of filing bankruptcy cannot be ruled out, I deem this as a highly improbable scenario. I see buyers of Etrade asset emerging at this share price level. It will take some time for Etrade share to recover. However, the stock is trading with worst possible scenario and I see some opportunity here with the stock.

ETrade (NASDAQ:ETFC): Color on news

We have couple of firms commenting on ETrade (NASDAQ:ETFC) after the co said on Friday it expects further write-downs on its $3 billion asset-backed securities portfolio and the U.S. Securities and Commission is investigating.

- Banc of America is lowering their tgt to $10.50 from $12 while keeping Neutral rating on the stock.

- Citigroup is lowering their rating on ETFC to Sell from Hold and cutting tgt to $7.50 from $13 saying the continued negative news flow about charges resulting from its mortgage & CDO exposure, an SEC inquiry, and continued deterioration in its financial condition, all increase the likelihood of significant client attrition.

Firm estimates that trying to liquidate E*Trade's loan & ABS portfolio would result in over $5b of losses (more than wiping out tangible equity). Based on accounting convention, E*Trade is not required to mark-to-market certain loans and securities. However, in the event that it has to sell these assets as a result of losing its funding sources (e.g. deposits & repo lines), losses could be realized. Citi's haircuts to arrive at the $5b loss estimate include 10% on 1st lien loans, 20% on HELOCs, and 25% on its ABS portfolio.

They lowering 07/08/09 earnings est to $0.31, $0.90, $0.90. the tgt of $7.50, includes a 15% probability of bankruptcy.

Notablecalls: Citigroup's call is titled "Bankruptcy Risk Cannot Be Ruled Out". That's why we have the stock down 30% in pre-market and not 10% like it should be following Friday's news. And it would still be a bounce candidate!

This stuff sounds like '00-'02 when Guy Moszkowski was covering ETFC for Citi (then Salomon). Think he downgraded the stock to Sell around $4. Man, this is clueless stuff. Prashant, you should have seen this coming and should now be looking for reasons to UPGRADE this stock, not downgrade. Phew!

It's a buy around $6. Even if the mortgage positions end up worthless, ETFC is worth a lot more than what it is selling for right now.

current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan, Goldman Sachs, Bank Of America, Wachovia, Comerica, and PNC Financial), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)

Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.

GS and JPM continues to be the best financial names.

Citi bank analyst Keith Horowitz is out with a comment this morning saying that JPM has the extremely manageable exposure in the CDO and LBO loan market. He expects modest yet conservative writedown of 300 mil in Jan Q. He cuts the earning estimate by 8 cents due to the mark down to $1 for next Q. Unlike its counterparts such as Washington Mutual, B of A, C as well as WB, JPM superior risk management and conservative product position in the sub-prime market is helping the firm to fare much better than other financial institutions. In fact, GS and JPM are the two names that our investment group focused since last year, and they have performed the best in among the brokerage and large integrated bank names. I continue to recommend buying JPM and GS aggressively while the share price are down. With economy slowing, I see the money rotation out of the energy as well as tech which had seen large money influx due to investors' not having the alternative sectors to put money amid credit crunch debacle. With financial sectors beaten to death and clearly undervalued at this point, once people accept that the economic growth will slow down and earning in the energy and tech will also get impacted, the money will likely to flow into more conservative value names that include many of the financial names. I am even earning upto the story of Citibank as the valuation is getting compelling. If you want a full report of Citibank, email me via investorhives.com mail. I will send you the report. Below are the short synopsis of his comment.

ABS CDO Writedowns Expected To Be Very Manageable

We Estimate a Relatively Modest $300 mil Mark from CDOs — Unlike BAC or WB, we expect JPM to have a limited mark to market impact from ABS CDO writedowns since it was a very small player in this market. We view our $300 million mark as conservative, and note it includes estimated hits from subprime mortgage exposure that was effectively hedged in 3Q.

Assuming $400 million mark on Leverage Loan Commitments — While still early in the quarter, we are assuming JPM's $40.6 LBO loan book could see a 1% or $400 million negative mark in 4Q based on current market trends. Reducing 4Q estimates. Based on MTM adjustments, we are trimming our 4Q EPS estimate by $0.08 to $1.00.

We believe JP Morgan's strong capital position and improved risk management allow the firm to operate from a position of strength in a tough market, which should allow it to capitalize on the inevitable opportunities that will likely come about as more players are negatively impacted by credit and market headwinds. Reiterate Buy and $57 target price.

current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan, Goldman Sachs, Bank Of America, Wachovia, Comerica, and PNC Financial), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)

Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.