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On Jun 4, 2013, we reiterated our long-term recommendation on TD Ameritrade Holding Corporation (AMTD - Analyst Report) at Neutral. This was based on the company’s strong fiscal second-quarter results. However, a fall in the company’s daily average client trades remains a plausible concern.

Why Neutral?

TD Ameritrade’s earnings for the said quarter came in at 26 cents per share, marginally beating the year-ago figure as well the Zacks Consensus Estimate. The results were primarily driven by a rise in revenues and fall in operating expenses. Moreover, the company’s strong capital deployment activities will boost investors’ confidence in the stock.

The Zacks Consensus Estimate for 2013 remained stable at $1.11 per share over the last 60 days. However, for 2014, the Zacks Consensus Estimate went down by 0.8% to $1.22 per share over the same time period. Hence, the company currently carries a Zacks Rank #3 (Hold).

TD Ameritrade’s advanced technology platform and the personal support of its service teams help RIAs to grow and manage their practices more efficiently. We believe that the company is advantageously poised to continue benefiting from both industry growth in RIAs and the increasing demand for retail investors.

Moreover, TD Ameritrade’s association with The Toronto-Dominion Bank (TD - Snapshot Report) allows it operate from the latter’s offices and this can help drive revenue growth in the near term.

However, since TD Ameritrade is mainly an online broker, laws and regulations as well as safeguarding practices related to the Internet can adversely affect its business.  Further, other regulations like the Dodd-Frank Act and constraints imposed on margin lending activities by the Federal Reserve System and Financial Industry Regulatory Authority remain headwinds to the company.

Other Brokerage Firms to Consider

Better performing brokerage firms include Ladenburg Thalmann Financial Services Inc. (LTS - Snapshot Report) and LPL Financial Holdings Inc. (LPLA - Snapshot Report), both of which carry a Zacks Rank #1 (Strong Buy).

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