INVESTools Changes Name to thinkorswim Group Inc.

by StockJockey

Friday, June 06, 2008 - 11:25 am

Originally Published In the News June 6, 2008 11:25 AM
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INVESTools Inc.(SWIM-NASDAQ) have changed their name to thinkofswim group, effective today. They have making a big splash in the world of retail/online trading, and from a distance it would seem they have built a solid trading platform that traders and bloggers rave about. However, given the massive ad dollars they are spending to publicize their ThinkorSwim trading platform, you are unlikely to get an impartial reviews from conflicted bloggers looking to get a little love in the form of banner ad dollars.

And some hedge fund managers would never touch the stock with a 10-foot pole given some of management’s previous transgressions, which might give you pause if you take them at face value, and care about management realted question marks. The ongoing SEC investigation of the company’s trading segment provides headline risk as well.

Still, every stock has its price, and with their stock down, and business looking robust, there might eventually be a trade here, although Kaufman Brothers is still on the sidelines:

In an 8K filed Thursday, INVESTools reported strong May 2008 trading metrics on its Think or Swim platform, with new funded accounts increasing 27% Y/Y to 4,000 and opened accounts increasing to 9,075 in the month, up 52% Y/Y from 5,975 in May 2007. These were modestly below April’s metrics of 10,050 and 4,700; the same seasonal pattern exhibited in 2007. April is typically a very strong month due to IRA funding in trading.

Significant to the TOS trading platform, retail DARTs increased 153% Y/Y in May 2008 to 52,400 while April retail DARTs increased 162% to 48,400, from 18,500 Y/Y, continuing the increasing activity of daily average trades and, indirectly, the increasing operating leverage of the platform as each trader becomes more active and feeds margins.

According to this 8K, in an indexed competitor DART growth chart, SWIM appears to have the leading DART growth among its competitors, including Options Express, Inc. (OXPS), Ameritrade, Inc. (AMTD), Charles Schwab, Inc. (SCHW), ETrade Financial Corp. (ETFC), Trade Station Group, Inc. (TRAD), and Interactive Brokers, Inc. (IBKR).

We are lowering our revenue to $350.1 million in 2008 for the company from $366.6 million to account for the smaller revenue contribution from education as pricing comes down. As a result of these changes, we are reducing our 2008 EPS estimate to $0.65 from $0.70. We now estimate 2Q08 (ended June 2008) revenue of $86.4 million and $0.16, from $91.4 million and $0.17

We are increasing our revenue to $452.95 million from $442.90 million for FY09. There is no change to our EPS estimate of $0.84 due to the estimated reduction in revenue growth from education (based on the price change for foundation courses to $299 from $999).

We maintain our HOLD rating due to the ongoing SEC investigation of the education segment and the lack of visibility on education revenues, volumes and margins as a result of the change in pricing for the foundation courses, as well as volatility in the market leading to a mixed picture on up-sell rates for foundation courses. Kaufman Brothers

Do you have to hold your nose when you buy the stock? Many skeptical shorts think so, but the company is clearly doing something right, as evidenced by market share gains.

No position for me, I have not done enough work yet. But I am considering moving my IRA there from Ameritrade, given their rapidly evolving state of the art platform. As an aside, I refuse to run financial advertising, and might be the most objective blogger on this stock and other online brokers, given I have no conflicts of interest. Get ready for more ThinkorSwim ads however; a big ad spend should keep them front and center in the financial blogosphere.