eToro (ETOR) trades around $39, roughly 50% below its 52-week high of $79.59. The stock has been battered all year despite a business that is still growing. The SpaceX IPO - now priced at $135 per share for a $75 billion raise and a $1.75 trillion valuation - has put eToro back in the headlines because it's one of the platforms offering UK retail investors allocation at the official IPO price. That's the story the press is covering. The investment case is different. The valuation reset has run ahead of any fundamental deterioration. The stock is at levels where the business already justifies a Buy, with or without the SpaceX halo.
What changed
eToro's stock price collapse is not new. Shares peaked near $80 early in 2026 and have since halved. The market is punishing the stock for fears about retail trading volume weakness, regulatory pressure on crypto and CFD products, and a broader sell-off in consumer-facing fintech names. But the operating numbers haven't followed the chart.
Q1 2026 was the latest test. Funded accounts rose 12% year-over-year to 4.02 million. Net contribution - the company's preferred measure of revenue after direct costs - grew 19% to $258 million. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization, a rough proxy for cash earnings) grew 35%. Net income was $82.4 million, up 37% from $60.1 million. Assets under administration reached $18.7 billion.
Full year 2025 was similarly solid: net contribution of $868 million, up 10% year-over-year, on a revenue base that grew from $931 million in 2024 to roughly $13.8 billion in adjusted terms reported by the company. Adjusted EBITDA for the full year reached $317 million. Net income was $216 million. The business is scaling faster on the margin side than the top line - which is the hallmark of operating leverage kicking in.
The stock didn't care.
Why the stock fell anyway
Three headwinds explain the sell-off. First, investor anxiety about regulatory risk to CFD and crypto trading products, which represent a large share of eToro's revenue. The UK's Financial Conduct Authority has been tightening rules on leveraged products, and crypto regulation remains in flux across jurisdictions. Second, macro sensitivity. Retail trading volume tends to spike during volatile markets and fade during calm stretches, and 2026 has lacked the kind of market turbulence that drives retail flow. Third, fintech multiple compression. After the 2020-2021 retail trading boom, the sector has faced a re-rating cycle, and eToro has not been exempt.
But here's the key question the market seems to be skipping: has the business impairment justified the valuation destruction? A 50% price drop implies the market now expects roughly half the earnings power it was paying for a year ago. The actual results suggest the earnings power is intact - maybe even stronger.
The valuation reset
At $39, eToro trades at approximately 14 times trailing earnings and about 0.3 times trailing sales. To put that in context: the company's FY 2025 net income was $216 million, and at a $4 billion market cap (roughly implied by the $39 price), that's a multiple that reflects near-zero growth expectations. The stock is being priced as if the business is a declining asset. It is not.
Wall Street analysts have an average 12-month price target around $60, with a high of $90 from Citizens and Deutsche Bank recently raising its target to $45 with a Buy. The consensus target implies roughly 50% upside from current levels. That gap between the street's view and the market's view is unusual. It usually means the stock has been sold for reasons that don't show up on the income statement - sentiment, sector contagion, or short-term flow concerns.
The 0.3x sales multiple is the most revealing number. That multiple would normally belong to a company in structural decline or with negative cash flows. eToro generated $317 million in adjusted EBITDA on a growing revenue base. The company is producing cash earnings at a scale that the market appears to be dismissing.
The SpaceX IPO angle
SpaceX is pricing its IPO at $135 per share, with approximately 30% of shares reserved for retail allocation - a first for an offering of this size. eToro announced it will participate in the UK retail offer, allowing its users to apply at the official IPO price rather than paying secondary market premiums. Trade Republic, another European platform, is doing the same for continental investors.
This matters for eToro in two ways. First, participation in a marquee IPO is a user acquisition and engagement engine. Retail investors who come for SpaceX may stay for the broader platform. Second, it signals that eToro has the regulatory standing and balance sheet to handle institutional-grade allocations, which reinforces trust with its retail base.
But I'm not rating this stock because of SpaceX. The IPO is a near-term flow catalyst, not a structural business change. It could help sentiment. It won't transform the fundamentals. The Buy call rests on valuation versus operating proof, not on who gets the SpaceX allocation.
Risks that could break the thesis
- Regulatory action on CFDs or crypto products. If the FCA or other regulators further restrict the product categories that drive eToro's revenue, the top-line growth story gets harder to sustain. This is the single largest risk and the main reason the stock has been discounted.
- Retail trading volume cyclicality. If markets remain calm through the second half of 2026, trading volume could disappoint and compress revenue growth. The business is more volatile than a traditional broker.
- Competitive pressure from zero-commission rivals. eToro's spread-based revenue model faces margin pressure as new entrants compete on pricing.
The downgrade trigger is straightforward: if net contribution or adjusted EBITDA growth drops below high single digits for two consecutive quarters, or if regulatory headlines directly threaten core product availability, the valuation cushion evaporates.
Investor takeaway
eToro is a Buy at current levels. The stock has been sold as if it's facing structural revenue decline. The actual data shows growing accounts, expanding margins, and accelerating cash earnings. The 50% price drop has created a valuation gap that the fundamentals don't justify. The SpaceX IPO participation is a catalyst that could help sentiment turn, but it isn't the reason for the rating. The reason is that at 14 times earnings and 0.3 times sales, the market is pricing in a business model collapse that hasn't materialized.
The proof point to watch: Q2 2026 results. If funded account growth and adjusted EBITDA expansion continue on the Q1 trajectory, the multiple has to re-rate. If they falter, the cheap valuation is cheap for a reason. That's the clock.