eToro Group Ltd. (NASDAQ:ETOR) faces an unusually revealing valuation test. Trading activity has broadened beyond cryptocurrencies, funded accounts are growing, and the company is acquiring more sophisticated U.S. brokerage capabilities. Yet the market has questioned whether its expenses and trading-volume volatility will let those additions translate into durable per-share earnings. In August, the company announced an agreement to acquire TradeZero for up to $231 million; a month later, multiple analysts were cutting near-term expectations rather than raising them.
Growth Is Broader Than Crypto, but Not Equally Profitable
In the second quarter of 2026, net contribution increased 9% year-over-year to $229 million, with adjusted EBITDA also up 9% to $78 million and a 34% margin. Funded accounts rose 18% to 4.28 million and assets under administration increased 10% to more than $19 billion. Equities, commodities and currencies generated $141.6 million in net trading contribution, up about 24%, as customers traded more actively. However, crypto net trading contribution was only $11 million, reflecting weaker activity and a shift toward equities.
eToro Group Ltd. is ranked tenth among the 10 best undervalued stocks to buy now according to Reddit. That placement does not negate its growing user base, because the ranking measures hedge fund ownership rather than growth potential. The nine stocks ahead of it offer an instructive contrast: will a low earnings multiple provide sufficient protection when an online brokerage’s revenue can change sharply with market activity?
TradeZero Expands Reach, but Costs Arrive First
TradeZero reported approximately $80 million in trailing revenue and offers infrastructure aimed at experienced traders. Management expects the acquisition to close in the first half of 2027 and become adjusted-EPS accretive during its first full year. In principle, an enlarged product suite could encourage clients to keep more trading activity within eToro Group Ltd., improving lifetime value, and spreading fixed technology costs across more accounts.
But eToro Group Ltd. is also spending to acquire those users. Q2 adjusted operating expenses totaled $151 million, with sales and marketing increasing by $8 million sequentially. July metrics showed assets under administration falling 5% year-over-year to $18.5 billion. However, August brought a recovery to $20.2 billion, up 3% year-over-year, while capital-markets trading volumes rose 31%, although average invested amounts per trade declined 29%. That difference between customer additions and activity per customer is crucial: assets and transaction intensity, not just sign-ups, drive profit. Our earlier report on why eToro’s acquisition spree signals ambitions beyond a trading app outlines the opportunities and integration demands of the expansion.
What a Single-Digit Multiple Actually Captures
The Seeking Alpha data shows eToro Group Ltd. at 8.79 times trailing GAAP earnings and 10.42 times forward GAAP earnings, while forward non-GAAP earnings trade at 10.05 times. Unlike a software company whose revenues are largely subscriptions, eToro’s earnings depend on market participation, asset prices and client turnover. Thus a low multiple could reflect both attractive profitability and a discount for less predictable activity.
The forward non-GAAP multiple of 10.05 compares with a sector median of 10.76. That is a relatively modest discount rather than an extreme valuation anomaly. Based on the supplied consensus estimates, EPS growth is projected at 7.04% for 2026, 26.30% in 2027 and 21.43% in 2028; the corresponding estimated P/E steps down from 10.05 to 7.95 and then 6.55 if the share price is unchanged and the forecasts hold. The acceleration assumed for 2027 therefore deserves particular scrutiny, because the TradeZero earnings contribution cannot be measured fully before the transaction closes.
Cash and capital allocation provide another check. Management reported $1.2 billion of cash equivalents and short-term investments at June 30, $39 million of quarterly operating cash generation and approximately $87 million of share repurchases during Q2. This provides some flexibility for transactions and product investment, but repurchases and acquisition payments must ultimately be supported by recurring cash generation rather than episodic surges in market turnover.
Wall Street Sees Different Earnings Paths
Recent target reductions are consistent with that uncertainty. On October 13, Susquehanna cut its target to $46 from $51, Positive, citing lower equities and commodities volumes. Mizuho cut to $43 from $52, Outperform, after July-August KPIs weakened, while Citizens maintained Outperform but lowered its target to $75 from $90 on October 9, pointing partly to sectorwide selling and uncertain capital-markets revenue. Goldman Sachs remained Neutral at $29 from $34 on October 7. The large range of targets reflects disagreement about the durability and timing of the earnings rebound, not simply whether the second quarter beat adjusted EPS estimates.
The number of bullish hedge funds stayed flat at 26 between Q1 and Q2 2026. Short interest rose to 3.63 million shares as of September 30 from 2.66 million on August 31, reaching 7.46% of the float. These snapshots suggest the market is weighing a more diversified platform against execution and cyclicality risks.
The deciding measures will be net contribution per active account, marketing efficiency, trading volumes after the seasonal slowdown and whether TradeZero adds earnings without eroding the 34% adjusted EBITDA margin. Our look at Robinhood’s attempt to build a financial super-app moat provides a direct comparison: another brokerage is widening its products to make customers more valuable, but with a markedly different valuation debate.
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