Shares of E*Trade Financial Corp plunged more than 7 percent on Thursday, a day after the online brokerage posted a third-quarter loss and lowered its full-year forecast for the fourth time this year.
Analysts at Banc of America Securities, Deutsche Bank, Goldman Sachs and Citigroup cut their price targets and lowered their earnings estimates on Thursday.
E*Trade posted a loss on Wednesday, missing Wall Street analysts' forecasts on both earnings and revenue as compiled by Reuters Estimates, due to higher loan-loss provisions and a securities impairment charge of $197 million.
The brokerage and bank, whose growth in recent years has been driven by a large portfolio of mortgage holdings, earlier said it was severely hit by this summer's mortgage market crisis.
It has exited the wholesale mortgage business and is restructuring its loan mix by allowing home equity loans and second-lien mortgages to bleed off its balance sheet.
Instead, E*Trade has said future balance sheet growth will come from loans it makes directly to retail customers, rather than third-party loans bought from lenders or brokers.
There seems to be a breakdown in its methodology for forecasting loan losses and determining the appropriate valuation of its securities, wrote Citigroup analyst Prashant Bhatia in a research note.
Bhatia, who reduced his price target on the stock from $15 to $13, said he expects additional losses of between $200 million and $400 million in E*trade's asset-backed securities portfolio, even after the $197 million impairment charge.
Shares of E*trade have fallen about 48 percent since the beginning of the year on investor concerns about its mortgage holdings.
Shares of rival brokerages Charles Schwab Corp and TD Ameritrade Holding Corp, meanhwhile, have both risen about 15 percent since the beginning of 2007.
Fox-Pitt, Kelton analyst David Trone recently called for E*Trade to sell its brokerage division to rival TD Ameritrade. E*Trade's independence equals dead money, he wrote in a research note.
E*Trade shares were down 90 cents at $11.57 in morning trading on Nasdaq. The shares have traded between $9.92 and $26.08 over the past 52 weeks.
(Reporting by Anupreeta Das)