TD Ameritrade Stock Surges as Volatility Is the New Norm

May 25, 2018 — 12:40 PM EDT

Shares of TD Ameritrade have been surging in 2018 as volatility has become the new norm in the stock market. While many long-term investors may not be happy to see stocks whipsawing between up and down days, investors in TD Ameritrade Holding Corporation (AMTD) stock are. After all, the more volatile the markets are, the more trades active investors place, and thus the more money discount brokerages make. At the same time that volatility is on the rise, the Federal Reserve is raising interest rates, which is another bonus for the discount brokerages that hold cash. The higher the interest rates, the more money the brokerages make on those assets.

As a result of all these factors, shares of TD Ameritrade have been on the rise. So far this year, the stock is up more than 15%, although it was trading lower in Friday's action. Shares were recently off 0.36%, or $0.22 per share, to $60.15. The stock's 52-week high stands at $63.01 per share.

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Investors aren't the only ones upbeat about TD Ameritrade's prospects. So is Wall Street, with 12 analysts rating the stock a buy and two assigning it an overweight rating. The stock has a hold rating from eight analysts, and there is only one sell rating on the discount brokerage's shares. Analysts have also been raising their estimates for the third and fourth quarters of this year during the past month, with the third quarter EPS estimate now at $0.80, a penny higher than it was a month ago. For the fourth quarter, the estimate stands at $0.86 per share, also a penny higher than it was a month earlier. The average price target on the stock is $67.06, which implies that the shares can gain more than 11% from current levels.

While Wall Street and investors are bullish on TD Ameritrade, it hasn't been all smooth sailing for the Omaha, Nebraska-based discount brokerage. For its fiscal second quarter, results failed to meet Wall Street views on the earnings front. For the first three months of 2018, TD Ameritrade reported net income of $271 million, or $0.48 per share, up from net income of $214 million, or $0.40 per share, in the year-ago fiscal second quarter. Revenue came in at $1.42 billion, up from $904 million in last year's fiscal second quarter. Analysts polled by FactSet had expected the brokerage to weigh in with EPS of $0.74 and revenue of $1.38 billion.