E-Trade Says Results Better Than Expected

Online brokerage E-Trade Group Inc. on Monday reported a narrower-than-expected net loss and increased revenue on higher customer trading volume in its fiscal first quarter.

The results propelled E-Trade shares up $20.88, or 31%, to close at $88.50 on Nasdaq.

E-Trade, the No. 2 online trader, reported a net loss of $13.2 million, or 23 cents a share, for the quarter ended Dec. 31, compared with net income of $5.13 million, or 12 cents a share, for the year-earlier period. An average 30-cent loss was expected, according to a First Call Corp. survey of 11 analysts.

It’s the first earnings report for an online broker, after a quarter when industrywide customer trading volume rose more than 30%. Charles Schwab Corp., the biggest online broker, and Ameritrade Holding Corp., the No. 6 firm, are expected to report quarterly results next week.

Palo Alto-based E-Trade posted a 63% increase in revenue, to $88.1 million for the quarter from $54 million a year earlier. It lost money because it spent $40.9 million on sales and marketing in the quarter, compared with $9.2 million a year ago, adding 132,000 new accounts at an average cost of $310. The company began a $100-million 12-month to 18-month advertising blitz on Sept. 7.

“We think the results are bodacious based on just about any metric you use,” Christos Cotsakos, the company’s president and chief executive, said in a conference call with analysts. He said the industrywide surge in customer trading “lifted all boats” though E-Trade is emerging as a top brand name in online investing. “We are building a franchise,” he said.

The company will focus on “revenue diversification” this year, with as much as 30% of its revenue coming from subscriptions, advertising sales, international ventures and other services, Cotsakos said.

E-Trade said customer accounts grew to 676,000 from 544,000 in the Sept. 30 quarter. Customer assets grew 36% during the quarter to $15.2 billion, and customer trades rose to about 43,000 daily from 30,500 in the previous quarter.

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Trading Up

E-Trade shares reached a 52-week high of $95 in intraday trading

Monday before settling at $88.50. The firm’s stock has risen almost sevenfold in three months.

Monthly closes and latest: $88.60