eToro's Diversification Narrative Masks Ongoing Crypto Volatility

What happened

A Seeking Alpha article claims eToro's rebound is beginning, citing Q4 crypto contribution falling to 24% from 50% YoY due to product expansions. The DeepValue report counters that November 2025 saw crypto trade counts drop 48% and ticket sizes fall 28%, despite user and asset growth. eToro's revenue remains over 90% tied to crypto, making earnings highly cyclical and vulnerable to market sentiment. New initiatives like neo-banking and ISAs aim to diversify but are nascent and face execution risks in a competitive landscape. Thus, while management promotes resilience, the core dependency on volatile crypto trading persists, challenging optimistic projections.

Implication

The reported drop in crypto contribution is a positive step but masks underlying volatility in trading intensity, which could pressure margins if sustained. Product expansions may drive future growth, but they are unproven at scale and might not offset crypto downturns quickly. With EBITDA margins at risk if crypto volumes stay low, the stock's current valuation of ~5.9x EV/EBITDA may not be sustainable in a bear scenario. The DeepValue report's base case of $38 offers moderate upside, but downside risks to $22 remain plausible if crypto activity weakens further. Therefore, maintaining a wait-and-see approach for several more quarters of data on revenue mix and market conditions is prudent before considering new positions.

Thesis delta

The new article reinforces the need for diversification highlighted in the DeepValue report, aligning with the call for revenue mix shifts. However, it doesn't alter the fundamental thesis that eToro's earnings are still heavily crypto-dependent and volatile, with recent metrics showing sharp declines in trading activity. No shift from the WAIT rating is warranted until concrete evidence of sustainable non-crypto growth and stable crypto performance emerges over multiple quarters.