Zacks Investment Research downgraded shares of E*TRADE Financial Corporation (ET) from OUTPERFORM to NEUTRAL on July 10, 2014, with a target price of $23.00.
We have downgraded our long-term recommendation on E*TRADE to Neutral based on reduction in daily average revenue trades (DARTs) in the first 2 months of the second quarter. However, first-quarter 2014 earnings came significantly above the Zacks Consensus Estimate as well as the prior-year quarter earnings. Results benefited from lower expenses and reduced provisions. As the company completed the sale of its market making business during the quarter, we expect the company's profitability to improve further in the near term as it aims to focus on core operations. E*TRADE's initiatives to reduce legacy balance sheet risks look promising. However, it might exert near-term pressure on the margins. Also, we remain concerned owing to the volatile equity markets limiting the growth of DARTs.
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