eToro Hits Play on $150M Buyback After Crypto Traders Eat 98% of Its Margins

Analysts: Meme stock mania is back… that’s good for eToro, right?

eToro: checks uses numbers nervously

Analysts: …right?

The social-trading hype machine that convinced half the internet they were Jim Simons with a “copy” button just reported Q3… and while the balance sheet came dressed for the Met Gala, user growth showed up in sweatpants.

Because on paper? Things looked beautiful. In reality? It’s giving “Instagram highlight reel energy.” Despite retail FOMO raging, Robinhood back on their BS, and crypto regulations practically nonexistent… eToro ain’t doing all that hot.

For starters, eToro beat expectations with $215 million in net contribution (up 28% YoY) and 60 cents EPS versus 56 cents expected… a respectable win in an industry powered mostly by hopium. The stock jumped 9% premarket, largely because “profit” in fintech is about as rare as spotting Bigfoot. But by the time markets opened, that excitement had already worn off… shares slipped 1%.

Now for the bad news… user growth has left the building. Meaning: the platform added just 100,000 funded accounts in the quarter… a 2.8% bump from Q2. That’s about how many new users Robinhood gets in a week during stock market downturn.

You have to give an A for effort… CFO Meron Shani tried to spin it as “disciplined growth.” Translation: we’re not losing people, but we’re also not exactly going viral on Reddit anymore. eToro’s business is still being carried by degenerate crypto traders… though maybe a little too much. It pulled in nearly $4 billion in crypto trading revenue, but almost all of it got eaten by transaction costs, leaving just $77 million in actual contribution… a horrific (get this) 1.9% margin.

Meanwhile, equity trading clocked in at $72.9 million, down from $114 million last quarter. Thankfully, interest income jumped to nearly $59 million, which is basically free rent from customers’ idle cash. In other words, eToro’s still making money… just not always the kind it controls.

To keep investors from checking out early, eToro hit play on a $150 million share buyback, half of which will happen immediately. Management says it’s because “the stock is undervalued.” Skeptics say it’s because new users aren’t exactly flooding in.

The fine print also revealed the buyback could double as M&A ammo, meaning eToro might start shopping around again. With $1.2 billion in cash, eToro’s got plenty of room to go hunting.  But no matter what, it’s never a great look when you can’t build growth and have to start buying it instead.

At the time of publishing this article, Stocks.News holds positions in Robinhood, Bitcoin, and Ethereum as mentioned in the article.