eToro shares
(NASDAQ: ETOR) crashed
12% yesterday (Tuesday) after the newly public trading platform delivered mixed
first-quarter results that disappointed investors focused on profitability
metrics. In after-hours trading, shares fell another 1.43%, to $66.

eToro Shares Drop 12% From
All-Time High After Q1 2025 Earnings

The
Israeli-based company reported
earnings per share of 69 cents, beating analyst estimates of 59 to 61 cents
but falling 9% from the 76 cents posted in the same quarter last year. Total
revenue climbed 11% to $3.75 billion, yet the market punished the stock for
shrinking profit margins and rising expenses.

eToro’s
adjusted EBITDA margin compressed to 37% from 43% in the prior year, while
total expenses jumped to $3.68 billion from $3.31 billion. Marketing spend
alone surged more than 60% to $61.2 million as the company ramped
up promotional activities around its May IPO.

At the
opening bell on Tuesday, eToro shares initially surged to a new all-time high,
testing the $79.96 level. However, the rally quickly reversed into a sharp
correction, with the stock hitting an intraday low of $64.15. By the end of
regular trading on the Nasdaq, eToro had lost nearly 12%, closing at $66.96. In
after-hours trading, the decline continued with an additional drop of 1.4%,
bringing the price down to a round $66.

Analyst Optimism Meets
Reality Check

The
earnings disappointment stung particularly hard because it came just one day
after 15 analysts initiated coverage on the stock. Ten of those analysts issued
buy or outperform ratings, with price targets ranging from $70 to $85. The
stock had soared nearly 11% on Monday to hit new highs at $75.97.

“I am
incredibly proud of the eToro team for producing strong first quarter results
and the successful completion of our initial public listing,” CEO Yoni
Assia said in the earnings release. “We believe that AI is turbocharging
the reshaping of the investing landscape and we’re excited to be at the
forefront of this transformation.”

Canaccord
analyst Joseph Vafi views eToro as a next-generation digital disruptor with a
value proposition that resonates with younger and active traders. Goldman Sachs
analyst James Yaro sees the company as well-positioned to grab market share in
Europe’s fragmented retail brokerage landscape.

Growth Metrics Show
Promise

Despite the
profit concerns, eToro posted solid user growth numbers. Funded accounts
increased 14% to 3.58 million compared to 3.13 million in Q1 2024, driven by
user acquisition efforts and the 2024 acquisition of Australian investing app
Spaceship. Assets under administration grew 21% to $14.8 billion.

The company
ended May with 3.61 million funded accounts and $16.9 billion in assets under
administration. Management said the “performance of the business” by
the end of May “reflects continued progress and interest in trading and
investing from retail investors in response to market events.”

Volatile Trading Since IPO

eToro went
public on May 14 at $52 per share and had gained 46% through Monday’s close. The
stock has shown extreme volatility, reversing sharply lower last Thursday
before rebounding 9.8% on Friday. Tuesday’s decline brought shares down to
$66.96.

Some
analysts remain cautious despite the growth story. Bank of America initiated
with a neutral rating, saying shares reached full valuation after recent gains.
Deutsche Bank also went neutral, citing risks from rising competition and
potential changes in adoption rates for the social investing platform.

The company
trades with a Composite Rating of 94 and an 85 Relative Strength Rating, though
it hasn’t been public long enough to establish key volatility metrics.