E-Trade (ETFC) is very interest rate sensitive. Many investors may wrongly believe that the online broker makes most of its money from fees and trading commissions, but the reality is that the vast majority of the company’s profits stem from interest income. Interest income accounts for roughly 65% of the company’s value, more than three times the contribution of trading commissions. As such, the stock was a strong performer in 2017 as rates started to rise. The stock did come under pressure as the overall market moved lower, but shares have already found support and are moving in the right direction again. As the volatility in the market eases, investors will realize that the overall economy is OK, and that the bull market should continue. Even so, they will shift their focus to stocks that have positive interest rate sensitivity, and stocks like ETFC will move higher. ETFC trades at $49.72, with an average price target of $60.56.
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