OptionsXpress Falls on "Sell" Rating

OptionsXpress shares fell $1.50, or 5.6 percent, to $25.23 in afternoon trading.

Much of OptionsXpress' 2007 revenue growth came from interest revenue and acquisitions, not through core volume growth, Merriman Curhan Ford analyst Richard Fetyko wrote in a research note.

"Core options volume grew only 16 percent, well below the sectors' total 41 percent growth in options volume," Fetyko wrote in the note.

Fetyko added that OptionsXpress could face multiple issues that are likely to slow earnings throughout 2008. Declining commission prices, an increase in customer acquisition costs, the need for investment in new technology and pressure on interest revenue growth could all hurt the brokerage's earnings over the next year, Fetyko said.

Fetyko anticipates OptionsXpress will earn $1.74 per share in 2008, with earnings of 44 cents per share during the first quarter. He expects 2009 earnings of $1.89 per share.

Shares of OptionsXpress have traded between $20.78 and $34.95 during the past year.