Summary eToro Group trades at deep value, with a $1.6B EV, $1.1B net cash, and 3.8M funded accounts. ETOR's unique 'copy trader' social network creates customer stickiness and a moat traditional brokers lack. Short-term headwinds from retail sentiment exposure and macro factors drive a hold/watch rating; entry is targeted below $25/share. Key risks include regulatory threats to CFDs, US market struggles, and potential regulatory scrutiny over gamification. If you screen stocks purely on numbers, then eToro Group ( ETOR ) looks like a mistake. It reports extremely bloated IFRS revenues because of crypto accounting rules, making its EV/sales effectively zero . It trades at a P/E ratio that suggests it is a declining legacy financial institution and not a growth fintech, which it really is. However, if you take a closer look at the stock, you find something very rare. This company isn’t just a brokerage; it’s a social network where people bet with real money. eToro has 3.8 million funded accounts, a balance sheet with around $1.1 billion of net cash, and a really sticky factor providing it with a moat called the “copy trader” feature, which traditional brokerage peers like Interactive Brokers ( IBKR ) and Robinhood ( HOOD ) simply cannot replicate overnight. The market is currently punishing eToro for its strong link to retail trading mania and crypto volatility. The recent Q4 results gave the stock a much-needed short-term boost. My take is that eToro is a high-quality business trading at a near-junk or decline price. However, the fall may not be over yet. I won’t be buying the stock today; however, I will be ready for the inevitable crypto winter decline in retail trading volume and prepare to buy this stock at further declines over the next 3-6 months. The business model - and Copy Trader To understand why eToro is worth taking a look at, let’s dig into the details of its business models and, most importantly, what makes eToro different. Most brokers are ‘utilities,’ and you would ideally go there, trade, and leave. Moreover, today, the stickiness that you would have with any broker is very limited, and it would take you just a few clicks to move your money completely away from one broker to another. This may not be the case with eToro, which has distinguished itself and positioned itself at the intersection of social media and finance. The core differentiator for eToro is its social graph. On the platform, every user’s performance can be made public if they choose to do that. You can actually see who is buying what, who is beating the S&P 500, and what they are holding. And most importantly, it just takes you a couple of clicks to copy them and instantly replicate their portfolio, including making adjustments in your portfolio based on the new trades that the person places. This creates a powerful network effect. For an amateur trader, you can get access to managed money results without paying the traditional 2% or 20% that you would pay to a smart hedge fund manager. You just copy some of the best-performing traders and get access to their trades in your accounts proportionately. At the same time, for certain popular investors, there is value in not leaving the platform because eToro pays you. The top-tier investors on the platform earn management fees based on the number of people and dollar value of assets that copy them. This keeps them locked on the platform, and they would ideally not want to simply leave eToro because they would lose a potential income stream. This social network reduces the churn in clients. Hence, when the market tanks, an individual trader on Robinhood would often leave the platform. However, a copy trader on eToro might just switch who they are copying, and instead of copying a crypto bull, they may end up copying the top value investor now but are likely to continue staying on the platform. The revenue engine and 2025 results We must ignore the multi-billion-dollar headline revenue numbers that are reported everywhere because they are inflated by IFRS accounting rules that force the company to recognize the entire gross value of crypto assets traded on the platform as revenue. However, the most realistic number to track income for eToro would be its commissions. eToro earns money through three primary sources, including trading commissions, interest income, and eToro money and non-trading segments. eToro net contribution ( Investor Presentation ) In 2025 , its net contributions are ~868M, and eToro earns the majority of this through spreads between the buy and the sell price. The spreads charged by the company are usually higher than the average and are ~1% , reflecting the quality of its underlying. Personally, I don’t like this revenue quality much because of two reasons. First, I believe that this excessive margin is someone else’s opportunity, and there is a potential that multiple investors can switch to other cheaper brokerages like IBKR eventually instead of paying such hefty spread commissions. Second, I believe the very wide spread also reflects the quality of the assets and the asset mix that trades on eToro, largely consisting of speculative assets like crypto, commodity futures, and other assets that have a higher fee compared to stocks and ETFs, which have a much narrower fee. As you can see from the chart below, eToro gets >50% of its trading revenue from speculative assets like crypto/commodities and currencies as of 2025. The share was higher in preceding years. In my opinion, this is bad news, as the trading revenues may contract if the mix changes significantly without high overall trading volume growth (e.g., to lower margin products like ETFs and equities). eToro asset distribution ( Investor Presentation ) Its second income stream is interest income of ~$217 million. Like all other brokers, eToro acts like a semi-bank. They earn spreads on the billions of dollars of client cash that is sitting on their platform. While this is a high-margin, sleep-well-at-night source of revenue. However, I’m not super optimistic about this stream in 2026 and 2027 because as the interest rates fall lower, the additional spread that eToro can charge to their retail customers reduces significantly. The third source of money is eToro money and their non-trading revenue of ~$100 million. This includes forex fees, withdrawal fees , and their growing debit card and payment ecosystem. Once again, I am not very bullish on this revenue stream going forward. To give you a personal example, I have a brokerage account on eToro, and earlier, I used to deposit currency in my brokerage in my local currency, which automatically gets converted to US dollars (at a heavy 2% forex charge by eToro). But with time, I learned that this may be causing significant leakage from the fees that I am getting charged, and hence, I used a fintech platform to directly deposit dollars to my eToro account. If you lose 2% returns in every currency conversion, your net returns will significantly lag the markets. The danger zone and why I am still not buying and waiting. The reason I am still not buying is the ‘earnings quality’ and the fact that there might be pressure on almost every source of earnings going ahead due to macro-driven factors. Additionally, one of the biggest reasons why I would not go all-in on eToro today is that despite its efforts to diversify into other asset classes like stocks, options, and ETFs, eToro is still structurally very long on ‘retail sentiment.’ While many analysts are celebrating the Q4 results by saying that crypto share in Q4 '25 is just 24% vs. 50% in Q4 '24, my point is that speculative high-margin assets like crypto, commodities, and currencies still account for >50% of the asset mix. They ride completely on retail sentiment. I believe that a large part of the retail traders today have not seen a life-shattering market crisis in their entire trading histories. Often when Bitcoin bleeds, retail volume in not just crypto but other assets can completely evaporate. In a situation like this, eToro will be left with very little revenue but a very high fixed cost base, including marketing and R&D. In a scenario like this, eToro is likely to see continued pressure on its price and multiple. We are already seeing some signs of this in both eToro’s price over the last 60 days and the broader brokerage market. Different crypto coins are bleeding, and retail engagement is softening. However, if the stock shrinks substantially more over the next 2-3 months, that might be my entry point for me. Valuation- the margin of safety is huge So now let’s distinguish emotion from numbers and deep dive into the valuation. It goes without saying that the discrepancy between eToro and its peers is amazing. Post Q4 earnings, the stock is currently trading at a share price of ~$30-33, having a market cap of roughly $2.7 billion . Of this, they have around $1.1bn in cash and cash equivalents on the balance sheet with almost negligible financial debt, giving it an enterprise value of around $1.6 billion. Essentially, the market is valuing the entire operating business of this brokerage with around 3.8 million users, multiple global regulatory licenses, and proprietary tech with a sticky factor like ‘copy trader’ at just $1.6 billion. Doing a peer analysis, I see that the P/E ratio, EV by sales, and price-to-book for eToro are significantly below its peers like Robinhood, Interactive Brokers, and even crypto peers like Coinbase. The implication is that the market thinks eToro is 3x worse than Robinhood because its earnings quality is so bad. eToro Peer analysis ( Seeking Alpha ) To stress test these valuations, I’ll try to run some sensitivity analysis and see whether the company can survive a severe bear market. In my first scenario, I assume that there will be a severe crypto/retail winter where the speculative asset revenue drops around 40% from the current level. There is no stock and ETF growth, and the trading in this category stays flat, so the total core trading revenue declines by ~20%. And lastly, the interest income falls due to declining interest rates, and the interest income declines by around 20%. Even in this disaster scenario, eToro’s revenue would roughly drop to around $700-770M. Additionally, because much of their marketing spend is variable, they can hit pause on their performance marketing when users stop converting to cut costs. In this scenario, they’re likely to generate around $100-$120 million in net income on a conservative basis. At a $1.6 billion enterprise value, you’re paying just 11x the earnings even in this disaster case. In my base case of flat growth and around $200 million of net income, you’re paying 8 times earnings for the business. This is certainly a deep value play, and I don’t believe this mispricing will last forever. Key risks I think there are multiple risks that eToro faces, and the first one of them is a regulatory risk. Unlike US brokers, which largely trade real shares, eToro’s European business relies heavily on Contracts for Differences, or CFDs , their derivatives that allow for leverage and track the underlying assets. Regulators usually hate them. There is a risk that if regulators, including the UKFCA or European ESMA ban crypto CFDs or cap leverage on these instruments, eToro's high margin spread revenue and margin revenue will vanish. This is an existential threat to their profitability that traditional US retailers like Robinhood do not face. The second risk is a US launch failure. eToro has been trying to crack the US market and has frankly not been very successful. It is a drop in the ocean compared to whales like Fidelity and Schwab and even sharks like Robinhood. Their US offering is very limited, and they lack multiple essential products like ‘options’ that power some of these brokers like Robinhood. In case they continue burning cash in the US without gaining market share, it destroys shareholder value over the long term. Personally, I’m not very optimistic on this front because the US is already a very crowded market. The third risk is that of reputation and excessive gamification today. eToro operates on a fine line between investing and gambling or gaming. It has a colorful interface, push notifications, and copy trading mechanisms, and these tactics, while driving stickiness and volume, can attract regulatory scrutiny , especially around the suitability of these products. Any major fine for predatory marketing could crush the stock price and trust. The game plan I am currently very bullish on eToro’s five-year future and believe that in the long run, some conversion between social media and finance is inevitable and that they are literally the leaders in this category. However, I am bearish for the next 3-6 months. My strategy is to wait. eToro stock has a very high beta of ~2 , which means that it drops twice as fast as the market. I am not very optimistic about the overall market direction in the very short term of the next 3-6 months and especially of the industry of stockbroking. I am looking to start a small starter position in the stock if it drifts to under $25. At that price, you’re essentially buying the business for free option value on the next crypto cycle and can significantly benefit if the overall crypto cycle goes up again. Hence, I currently rate the stock as a hold or a watch at this price level and will start making an entry in it if it reaches the mid-20s.