E-Trade: Good Call, Bad Call, or Alarmism

With E-Trade stock now back within spitting distance of where it was before it got kicked in the shins by a Citi analyst on Monday it’s worth musing what it all means. The online brokerage firm’s stock was at $8.60 at the close last Friday, fell to $3.46 on Monday after the bankruptcy worries broke, and today it’s all the way back to $5.82.

In other words, the stock fell by almost 60%, and is now up 68% from its lows. Granted, that’s the not the same thing as saying it’s back to where it was at the close last Friday — that would be more than a double — but it’s still a remarkable run in both directions.

Does that make the original Citi call a good one though? Well, the stock is still down, even if it’s a good chunk of the way back to where it was. And everyone is now mulling the implications of E-Trade’s foray into subprime mortgage markets.

On the other hand, with the stock having rebounded so strongly it’s clear that many people see value here. Granted, most of the current is on buyout interest, so if something doesn’t appear soon, it’s more likely that we see neutral/negative news first and the stock gets taken lower again, but for now it’s been a fantastic trade for anyone who bought E-Trade at the close on Monday.