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2 Stocks That Rocked the Market on Thursday

By Eric Volkman - Nov 21, 2019 at 9:38PM

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Patient investors in a top online brokerage and a ride-hailing company became incrementally richer on the day.

Thursday's action around top stocks was, compared to some of the more ho-hum days lately, quite lively and eventful. Although some of the key stock indexes turned down at market close, some right-time-right-place investors saw nice rises in their holdings.

I'm thinking of several stocks in particular that were affected by fresh and very encouraging pieces of news. Read on to find out more.

Charles Schwab/TD Ameritrade

Following a drawn-out price war that drove stock trading commissions down to $0 throughout the industry, the online brokerage sector appears to be consolidating.

And it seems the first target of this potential trend is TD Ameritrade ( AMTD ). According to credible media reports, Charles Schwab ( SCHW -2.66% ) is in talks with its rival about acquiring it.

TD Ameritrade was one of the last holdouts to resist $0 commissions, following -- yes -- Charles Schwab's dramatic elimination of this charge in October (the company was the first major brokerage to do so).

When TD Ameritrade followed suit just afterward, its stock was severely punished. From a high of almost $60 per share earlier this year, the company has closed as low as $32.69.

Charles Schwab's pursuit, which apparently has been stop-and-start over the past few months, is pumping the stock prices of both companies. It seems the acquisition price being considered is roughly around the $48-per-share mark, so TD Ameritrade closed the day 17% higher at slightly over that level. Charles Schwab rose a more cautious 7%.

The latter is an interesting development -- in a typical acquisition, the stock price of the acquirer dips on the anticipated hit to the finances and fundamentals. In this case, though, there are clear and obvious synergies between these two companies with very similar businesses. Consolidating the two will probably not be difficult or drawn out.

Still, even at a depressed share price, TD Ameritrade is a big swallow even for a monster fish like Charles Schwab. I'm not sure we should get too excited yet and bid up the latter company's stock much without seeing how it's integrating its new asset post-deal (assuming said deal goes down, of course). For me, the latter stock is a wait-and-see.

A driver and three other people in a car with a Lyft sign on the dashboard.

Image source: Lyft.

Lyft

Ridesharing giant Lyft ( LYFT -4.35% ) got a lift from two helpful developments on Thursday.

A positive analyst note on the company, plus news of a rival running into its arms in a major market, cheered investors. Lyft stock saw a boost of more than 6% on the day.

Royal Bank of Canada's RBC Capital Markets issued an upbeat analysis following recent discussions with Lyft management. The investment bank believes that with rider discounts and incentives being phased out, the company has a clearer road to profitability.

On top of that, privately held Gett announced earlier this week it would pull the plug on its Juno ridesharing service in New York City. Gett/Juno and Lyft have a strategic partnership, so the former is directing its clientele to Lyft's services.

Have you taken rides with Juno? Me neither -- the service is a minnow compared to the whales that are Lyft and top competitor Uber Technologies ( UBER -4.18% ). Still, even if Juno is small, its beat-then-join move constitutes a pair of wins for Lyft in the ever-busy New York City market.

While cutting a slice of victory cake, however, we should remember that Lyft -- and Uber, too, while we're on the subject of ride-hailing behemoths -- is still deeply in the red.

Lyft beat revenue and bottom-line estimates from analysts in its most recently reported quarter... but the latter line item still came in at a loss of nearly $122 million. A nice analyst note and the absorption of a small competitor aren't going to suddenly flip that into the black.

I have been bearish on both Lyft and Uber for some time now. Their business models are cost-heavy, and I think going forward they will face customer resistance as those discounts and deals fade away (particularly in the case of Lyft).

Yes, they have done much to widen their revenue streams, but profitability is still far in the distance -- if it occurs at all. I'm not a believer, and as such I'd continue to give the ridesharing sector as a whole a miss.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

TD Ameritrade Holding Corporation Stock Quote
TD Ameritrade Holding Corporation
AMTD
The Charles Schwab Corporation Stock Quote
The Charles Schwab Corporation
SCHW
$77.97 (-2.66%) $-2.13
Lyft, Inc. Stock Quote
Lyft, Inc.
LYFT
$40.00 (-4.35%) $-1.82
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
UBER
$38.04 (-4.18%) $-1.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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