eToro’s recent listing on NASDAQ has introduced a compelling new player to the public markets within the fintech trading sector. With shares surging to $67 and a market capitalization of $5.4 billion, eToro’s entry presents an interesting investment case, especially when compared to established competitor Robinhood. While ETOR stock has had a good listing, if you want an upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P and clocked >91% returns since inception. Separately, see – HIMS Stock To $100?
eToro’s Attractive Valuation Proposition
At current levels, eToro (ETOR) is trading at just 0.43 times its 2024 revenues of $12.6 billion, positioning it as a remarkably affordable option in the fintech space. This attractive multiple is complemented by eToro’s extraordinary year-over-year growth rate of 226% in 2024. Admittedly, one of the reasons for the company’s low multiple is the fact that its net income for 2024 was just $193 million – representing a modest 1.5% net income margin. However, the combination of high growth, recent efforts to keep costs under check and low valuation multiple suggests significant upside potential for investors.
Robinhood’s Competitive Position
In contrast, Robinhood (NASDAQ: HOOD) trades at a substantially higher valuation of 17 times revenue. While the company achieved impressive sales growth of approximately 60% last year, this pales in comparison to eToro’s explosive expansion. Robinhood’s key advantage lies in its profitability, with a substantial net income margin of 49% – vastly outperforming eToro’s current margin of 1.5%.
Robinhood’s revenue growth over the past three years stems from several strategic advantages:
- Expanded user base of over 25 million funded customers
- Growth in premium subscribers with Robinhood Gold reaching 2.6 million users
- Diversified revenue streams, including booming cryptocurrency and options trading
- Consistent growth in traditional equities trading
- Enhanced interest income from user deposits in a higher interest rate environment
Also, see if you should buy or fear Robinhood stock.
One Thing In Common: Strategic Acquisitions
Robinhood and eToro have both relied on a string of acquisitions to diversify their offerings as well as to grow their presence in existing and new geographies. And this strategy is likely to continue to be a core long-term growth factor for both companies. Notably, Robinhood completed 4 acquisitions in 2024 and more recently announced plans to acquire Canadian cryptocurrency company WonderFi for $180 million – a move that could yield significant growth as cryptocurrency markets show signs of resurgence.
eToro has had to be more careful with its cash since it burnt through its reserves in the run-up to its failed IPO in 2021-22. It went ahead with only 1 acquisition in 2024 (of the Australian investing app Spaceship), but we expect it to divert a sizable portion of its freshly raised capital towards strategic acquisitions in the near future.
Comparative Analysis
While eToro maintains a larger customer base with over 30 million users and now generates higher absolute revenue, Robinhood’s superior profitability metrics have attracted investor confidence. Despite trading at a premium to its three-year average price-to-sales ratio of 8x, Robinhood’s solid profit margins and strategic positioning have sustained its higher valuation multiple relative to eToro.
The Verdict
The stark contrast in valuation multiples between these two fintech trading platforms presents investors with an interesting choice:
- eToro offers an exceptionally low price-to-sales ratio of 0.43x coupled with extraordinary revenue growth of 226%
- Robinhood commands a premium valuation at 16x sales but delivers much stronger profitability with 49% margins
For investors, the decision may ultimately depend on whether eToro can convert its impressive top-line growth into stronger profitability metrics over time, or whether Robinhood’s established profitability and strategic expansion justify its significantly higher valuation multiple.
The recent listing of eToro, Robinhood’s international expansion efforts, and the overall maturation of the fintech trading sector suggest that both companies will remain dynamic competitors worth monitoring closely in the evolving financial technology landscape.
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