E*TRADE's Fantastic Voyage to $1.15 a share

If you can't take the heat get yo' ass out the kitchen, E*TRADE's (NASDAQ:ETFC) on a mission, straight to $1 a share. Nothing like a 65% decline in the last 3 months and getting on the TARP handout list, its been a fantastic voyage.

E*TRADE's new slogan:

And you should do more with your money, like move it to a online broker that will survive 2009:

The kitchen is getting very hot for E*TRADE shareholders,18% of ETFC shares are short, and this chart looks doesn't scream 'global financial services company', does it, maybe it does?

E*TRADE started heading down last year after everyone worried that the company might have to seek bankruptcy protection if panicked customers withdrew deposits because of the brokerage firm's faltering mortgage investment. 

Ah, the glory of subprime, it even hit E*TRADE. As Jamie Dlugosch put it from BloggingStocks.com:

The company (E*TRADE) lost its focus by trying to be a bank. That move into
gathering deposits to lend to the mortgage market was a disaster, to
say the least.

ETFC's share value collapsed to less than $1 per share as a result. Its 52-week high is above $5. With the company seeking $800 million in TARP money, its survival is in question.

Assuming it receives the money, ETFC may be worth considering from an investment standpoint. Obviously there is a high degree of risk, but its discount brokerage business has the potential to demonstrate impressive growth in the future.

Instead of horsing around with the government on a rescue package, ETFC should be promoting the heck out of the benefits of day trading. It is letting some great marketing opportunities slip by
.

 

To be fair, Jamie also went on to put a positive spin on E*TRADE, if that is possible:

The company should see customer account growth as investors realize the benefits of trading this volatility.

Yesterday, ETFC announced that it added 26,000 new customers in November, and now can boast 4.5 million customers.

Daily average trading revenue was down slightly from the year-ago period, indicating that customers have yet to figure out that volatility can be traded profitably. That makes sense when you see that customer assets dropped by 42% to $110.1 billion.

Clearly, investors are gun-shy, but that is where the management of ETFC can step in and educate customers on the benefits of placing more trades.

Assuming the company can resolve balance sheet issues, taking a risk on ETFC may pay big rewards down the line.

But back to the voyage down to $1.  At rate ETFC shares have headed and the 52-week low hit last month of 79 Cents a share, that's right, $.79 USD -- it's a risky bet.

E*TRADE's accounts are FDIC insured, so that's good, but as far as buying E*TRADE shares, they are not FDIC insured. 

Should E*TRADE have to 'restructure' or 'make organizational changes' that wipe out shareholders, you get could nothing buying ETFC these days. Slide slide slippity-slide all the way down to 1 Penny, better make a left.

Disclaimer: No positions in ETFC.