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Pro Analysis

UBS recommends ETrade shares on possible takeover, expansion into options market

Pedestrians walk outside an E*Trade Financial office in New York.
Daniel Acker | Bloomberg | Getty Images
Pedestrians walk outside an E*Trade Financial office in New York.

Investors should buy ETrade on the brokerage firm's expansion into the options market and a potential takeover, said UBS, which initiated the stock at a buy.

"ETFC's new management team has implemented a plan to improve operating metrics or seek a buyer for the franchise, which should help to limit downside in ETFC shares, in our view," said UBS analyst Brennan Hawken in a note on Monday.

CNBC reached out to ETrade for comment but did not receive an immediate reply.

The broker acquired Aperture New Holdings, the parent company of OptionsHouse, for $725 million in July 2016. OptionsHouse, which merged with tradeMonster in 2014, had more than 150,000 accounts.

ETrade shares are up around 2 percent this year, trailing the overall market, as investors grow worried about increasing price competition in the online brokerage business.

ETrade shares year-to-date performance