Shares of eToro have fallen 27% since its IPO in May. Why does Deutsche Bank advise buying them?
Deutsche Bank raised its rating on shares of eToro, a stock and cryptocurrency trading company, from "Hold" (Hold) to "Buy" (Buy), seeing prospects in it after the publication of the report for the third quarter, CNBC writes. Bank analyst Brian Bedell also raised his target price from $44 to $45, suggesting its shares are up 19% from the previous close.
Shares of eToro, which debuted on Nasdaq in May, have fallen 27% since its IPO. In trading on November 11, they added 6.3%.
What does he see as the driver of growth?
Deutsche Bank upgraded its rating after eToro reported third-quarter results that exceeded analysts' expectations. eToro reported adjusted earnings of $0.6 per share for the three months ended Sept. 30. Analysts were expecting $0.56 per share, according to the average forecast compiled by LSEG, cited by Reuters. The company's net contribution, a measure that takes into account revenue less crypto-asset-related expenses and interest expense on margin transactions, rose 28% year-on-year to $215 million. The fintech company's assets under management rose 76% year-on-year to $20.8 billion.
Bedell said the company's strong fundamentals, coupled with this year's stock price decline, make eToro stock more attractive to investors.
"While the company's earnings could be volatile, given that several growth areas are still in the pipeline, we believe our outlook could be conservative if the company succeeds in its strategy to expand in the U.S. market and implement other growth initiatives," he wrote.
The analyst added that given eToro's new initiatives and positive business dynamics, he is now more confident about the prospect of double-digit customer growth. He expects the company's trading revenues to grow as well, while non-trading areas such as subscriptions, remittances and interest income remain robust.
Bedell also noted that eToro recently launched an auto-tracking feature in the US, allowing users to automatically copy trades and portfolios of other successful investors. Despite its already strong position in Europe, the analyst praised the company's efforts to expand its presence in the US and Asian markets.
What other analysts are saying
Compass Point initiated coverage on eToro in mid-October with a buy recommendation and $66 target price. Its target implies a 74% share price increase.
A total of 16 analysts track the company's securities, and nine of them are positive and advise to buy them. The other seven recommend to hold them.
The average target price implies eToro securities growth by almost 62% from the current level.
This article was AI-translated and verified by a human editor
