Fly News Breaks for October 4, 2019
Oct 4, 2019 | 13:13 EDT
Valuation was a large impediment in Toronto-Dominion Bank (TD) owning 100% of TD Ameritrade (AMTD) in the past but that appears to no longer be the case, RBC Capital analyst Darko Mihelic tells investors in a research note. Ameritrade's forward consensus price-to-earnings multiple has dropped to 9.8 times, which is near historical lows, the analyst points out. He calculates that a 20% cash, 80% stock purchase would be 2.1% dilutive to his 2021 earnings estimate for TD without any assumed synergies at a purchase price of $45 per share for Ameritrade. TD only needs to find more than C$320M of synergies in 2021 for the transaction to be accretive, adds Mihelic. The analyst believes 100% ownership of TD Ameritrade makes strategic sense notes that at current valuation levels, the acquisition "could be significantly accretive to TD." Mihelic has a Sector Perform rating on Toronto-Dominion shares with a C$80 price target, down from C$82.
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