Shares of TD Ameritrade Holding Corp. (AMTD, Financial) are up over 8.79% year to date. The financial services company recently announced a new partnership with Certent, which will allow it to make significant investments in the company’s stock plan business.
TD Ameritrade’s expanded relationship with Certent will allow for enhanced administration services for the company’s equity compensation plans, along with stock plan services and investment in technology solutions.
The Omaha, Nebraska-based company has continued to drive growth in recent quarters. It has also gained market share despite commissions of $6.95 per trade, while competitors are offering commissions as low as $1. The company’s proprietary trading platform has fueled market share growth while helping maintain their commission fees.
A strong emphasis on research, customer service and technology has allowed TD Ameritrade to sustain growth despite operating in an enviornment where investors have low- or no-fee trading options.
The company is benefiting from the wealth management industry as institutional clients are migrating to registered investment advisors. The company has over 6,000 registered investment advisors thanks to its trading platform, services and technology. TD Ameritrade expects this figure to continue to rise over the coming years.
Client account balances also benefited the company as TD Ameritrade thrives off of higher interest rates. Interest income rises on higher rates on both account balances and margin loans, making it an ideal choice for investors that want to hedge against rising rates and secure their portfolio further.
The integration of Scottrade’s brokerage business is also progressing well. The company now has over 11 million client accounts and over $1.3 trillion in assets.
Net new client assets in first-quater 2019 reached $32 billion, with GAAP diluted earnings of $1.07 per share. Pretax margins were 51%, with average client trades per day at 928,000. Fee-based investment balances rose 5% year over year to $254 billion, suggesting the company’s fees are not discouraging investors from using the platform.
Projections for 2019 have the company posting revenue greater or equal to $5.7 billion, with commission rates falling 2% to 3% year over year. Net new assets growth is expected to be between 7% and 10%.
With a platform of technology and services, TD Ameritrade is positioning itself well despite competing in a market where fee-based commission rates are fading. Rising earnings estimates and the potential for growth make this stock worth looking into.
Disclosure: The author does not have any stakes in the listed equities.
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