Our Stock of the Week is eToro (ETOR). ETOR is an online trading platform that allows trading in stocks, cryptocurrencies, ETFs, commodities, indices, forex, and other financial instruments. It was founded in 2007 and is headquartered in Israel.
70% of ETOR's funded accounts are in Europe and the UK, 16% are in Asia-Pacific, and only 10% are currently in the Americas, including the US. ETOR was limited to just cryptocurrencies in the US and has faced other regulatory hurdles from the SEC. Lifting those restrictions will be key to growth in the US, but Europe is likely to continue to be its dominant market.
What is most intriguing about ETOR is that it has combined social media with the brokerage function. It has been compared to a combination of Reddit (RDDT) and Robinhood Markets (HOOD).
The social trading aspect is a core feature of its platform and integrates social networking with online trading, allowing users to interact, share insights, and replicate the trades of experienced investors.
The key component of this is a CopyTrader feature that allows users to automatically copy the trades of successful traders (known as Popular Investors) in real-time. Users can browse profiles, review returns, risk levels, and portfolio composition, and allocate funds to mirror their chosen trader's actions. The minimum amount to copy a trader is $200, and users can copy up to 100 traders simultaneously. CopyTrader is primarily available for crypto trading in the US, with plans to expand to stocks and ETFs.
The Social News Feed enables users to follow assets and traders, post updates, comment, and engage in discussions and operates like X and Facebook. The Popular Investor Program incentivizes successful traders to share their strategies by rewarding them based on the number of copiers they attract. Popular Investors must maintain transparency, as their trades and stats are public, encouraging accountability and consistent performance. There is also financial education and various analytical tools.
The IPO was very successful, and the stock is trading at around $71 and pricing at $52 on May 14. Initial analyst coverage is starting on June 9, with initial target prices ranging from a low of $65 to a high of $85.
Goldman Sachs (GS) placed a $76 target on the stock and sees ETOR as an attractive market share gain story in the "fragmented" European retail brokerage market. The company has a "differentiated" offering versus peers in terms of geographic and product breadth. Goldman believes CopyTrader is both a loss mitigation tool and a tool to facilitate social trading, "which many younger investors want."
The initial coverage may produce a 'sell the news' event for ETOR, but there should be strong underlying support and dip buying. I am looking for opportunities to add to my position in pullbacks and would not chase the gap-up open on Monday morning.
This post is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this post. Do not buy, sell, or trade the stocks mentioned herein. We WILL actively trade this stock differently than discussed herein. We will sell into strength and buy or sell anytime for any reason. We will actively trade into any unusual activity. At the time of this post, principals, employees, and affiliates of Shark Investing, Inc. and/or principals, clients, employees, and affiliates of Hammerhead Financial Strategies, LLC, directly or indirectly, controlled investment and/or trading accounts containing positions in ETOR. To accommodate the objectives of these investing and/or trading accounts, the trading in these shares will be contrary to and/or inconsistent with the information contained in this posting.
