Goldman Sachs cuts eToro stock price target to $35 on mixed February trends

Goldman Sachs cut its price target on eToro to $35 from $36 while keeping a Neutral rating; ETOR trades at $31.40, below InvestingPro fair value $39.53 and after a >52% share decline over the past 12 months. February operationals showed 70.2M equity/commodity/currency trades (+81% YoY, -6% MoM), crypto trades 3.3M (-35% YoY, -21% MoM), ~50k net new funded accounts (funded accounts +9.5% YoY) and AUA up 13% YoY to $17.6B. Goldman nudged 2026–2028 EPS estimates ~+1% but cut its valuation multiple by 0.5x to 10.5x; rival brokers raised targets (BofA $44, Cantor Fitzgerald $52 OW, TD Cowen $55), leaving mixed signals for near-term share direction.

Analysis

eToro sits at an inflection where a structurally lower share of crypto activity and a higher share of equities/FX revenue materially change its earnings cadence and valuation multiple. That shifts the key drivers from volatile transaction fees to steadier spreads, net interest income and AUA monetization — a transition that benefits platform operators with deeper product breadth and weakens pure-play crypto venues. Customers who trade less frequently but hold larger balances lengthen the payback on customer acquisition, amplifying the importance of deposit yields and fee diversification over the next 6–18 months.

Competitive dynamics favor firms that can convert AUA into recurring margin through ancillary products (margin lending, custody, managed products); incumbents with scale and local licensing in Europe can raise switching costs. Second-order beneficiaries include European custodians and FX clearing providers who earn incremental flows as retail volumes shift from crypto rails to regulated asset classes. Conversely, players dependent on crypto-derived volatility and transfer fees face a multi-quarter revenue cliff unless they successfully transition product offerings.

Key short- and medium-term catalysts to watch are (1) interest-rate normalization and its pass-through to client cash yields (3–12 month sensitivity), (2) product launches that accelerate non-crypto monetization (6–12 months), and (3) regulatory or tax changes in key European markets that could compress margins or raise compliance costs abruptly. A downside shock would be a renewed crypto bull market that re-concentrates trading volume outside regulated venues or a rapid drop in client cash balances that crushes net interest income.

Contrarian read: the market’s headline focus on crypto volatility understates the balance-sheet optionality from AUA growth and non-transaction revenue. If management can lift take-rates on assets and stabilize NII, a multiple re-rating is plausible over 9–18 months; the reverse is also true if client cash yields and retention deteriorate, making this a classic optionality-on-platform story rather than a pure trading-prop thesis.

Key Decisions for Investors

• Long ETOR equity (12–18 months): build a position sized for 4–6% of cyclical allocation to capture re-rating if non-crypto monetization accelerates. Target 35–50% upside if AUA monetize and margins expand; hard stop at 20% drawdown or deterioration in funded-account retention metrics.
• Pair trade — Long ETOR / Short HOOD (12 months, equal notional): play European retail concentration and superior product mix vs US-centric, crypto-exposed peer. Aim for 30–40% relative return if ETOR re-rates; cap loss at 18% absolute on either leg with rebalancing at quarterly results.
• Options hedge/spec — Buy ETOR 9–12 month call spread (bullish, defined risk): deploy to express a 3:1 asymmetric payoff to a re-rating while limiting capital at risk. Use 6–12% of the equivalent delta-equity exposure as premium budget; unwind on sustained AUA monetization or after the next two quarterly prints.
• Risk-off protection — Buy 3-month ETOR put spread into next earnings (short-term hedge): cheap insurance against a surprise NII miss or regulatory news. Cost should be sized to cap portfolio downside to <5% of NAV for the event window.