Wells Fargo downgrades e-brokers, swinging to bearish from bullish on TD Ameritrade

Wells Fargo analyst Christopher Harris slashed his ratings and price targets on certain discount e-brokers on Thursday, saying it has become "very difficult" to identify a bull case for the group after the brokers cut some commissions to zero. For TD, Harris swung to a bearish underperform rating from a bullish outperform, to reflect the broker's "worst-in-class" earnings growth profile. He cut his price target to $30 from $58. The stock was down 0.7% in premarket trading, after plunging 28% the previous two sessions to close Wednesday at a 3-year low. Harris downgraded both E-Trade Financial Corp. and Charles Schwab Corp. to market perform from outperform, and cut E-Trade price target to $37 from $55 and Schwab's to $39 from $50. E-Trade's stock gained 0.1% premarket after falling 19% the past 2 days, while Schwab shares edged up 0.1% premarket after shedding 13% the past 2 days. Meanwhile, the Dow Jones Industrial Average declined 838 points, or 3.1%, the past 2 days. "The only positives we see (other than the possibility of a short-term relief rally for the stocks) are likely expense cuts and stock buybacks, but EPS benefits from those sort of actions don't deserve a very high multiple, in our view," Harris wrote in a note to clients.

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