I think there are a number of reasons for the underperformance of eToro’s stock since it IPO’d.
However, it seems to me that the main factors behind the share price fall are geographic and cultural differences.
I say that because, unlike rivals such as Robinhood eToro’s clients base is international rather than US focused. Ss of the end of 2024 just 10.0% of eToro’s clients were in the US. What’s more retail OTC trading, which still makes up a large portion of eToro’s turnover is somewhat alien to US investors, not least because over-the-counter trading in the US is off limits to most retail clients.
A downturn in the crypto markets, which kicked off in August last year can also be blamed. It’s my understanding that crypto trading is a higher margin business for the firm so a prolonged downturn, in a largely sentiment driven asset class, would likely dent the firms revenues. And that could be a factor behind the recent news of headcount reduction.
For eToro to shine I think it will need to demonstrate that it’s growing its US business, and show that it can profitably participate in on exchange trading, particularly in growth areas like OTDE options.
