Bank Of America Says Summer Seasonality May Sap TD Ameritrade Revenues, But There's Long-Term Potential

"In the near term, we expect revenues to decrease slightly driven by moderating trading revenues (DARTs +1 percent QTD, though summer seasonality approaching), partially offset by stronger spread-based revenues (recovery in margin/sec lending balances/yields and IDA balance growth) and fee-based revenues (positive QTD markets and solid NNA growth)," analyst Michael Carrier wrote in a note.

Carrier, who expects buybacks to continue at their current pace, sees operating costs ex-advertising growing 1–2 percent sequentially, due to DOL expenses and continued technology upgrades.

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That said, Carrier continues to see long-term upside from organic growth, rates/margin upside and expense/capital management. But, valuation is keeping the analyst at Neutral.

However, the analyst cut his 2016 EPS estimate to $1.54 from $1.55 and revenue view to $3.328 billion from $3.339 billion. But, Carrier raised his price objective to $32 from $29.

At the time of writing, shares of TD Ameritrade were down 0.6 percent at $29.83 in after-hours trading, minutes after Wednesday's closing bell.

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