Intro: It's not hard to see why FTCV is a nice assymetric risk/reward play at $10.30 with a recent one-month high of $11.55 and ATH of $15.70. With the SPAC market hot right now, it's an easy bet. That being said, I think there's a lot more meat to this bone than that. Here are some of the reasons/catalysts I'm bullish on eToro and think it will perform well after merger:
- Valuation-wise, we can see below how eToro compares to $HOOD (similar high growth) and $IBKR (much lower growth). If we take HOOD's rev multiple and use FTCV's YTD run-rate revenue, we get a price of $18.70. If we take IBKR's multiple and FTCV's lower guidance rev, we get a price of $11.08. I believe eToro should be valued much closer to HOOD based upon their growth rate, especially considering HOOD's recent negative sentiment and disappointing Q3 rev growth only 35% compared with eToro's neutral(?) sentiment and 66% Q3 rev growth.
|2021E Rev ($M)
||$1018M guidance ($1239M based on YTD run-rate)
||68% (105% based on run-rate)
|Market Cap ($B)
|2021 Rev/Market Cap Multiple
||10.21 (based on guidance), 8.39 (based on run-rate)
- The growth/investment narrative is there. eToro is a play on the retail trading surge, meme stock/social trading strategy, and gamification of the stock market. It combines interesting stocktwits-like features with the appealing UI of Robinhood.
- And it's executing. eToro should easily beat their 2021 guidance of $1018M. Through three quarters, they have already achieved $929M and based on that run-rate, they would achieve $1239M for the year. $1239M would put them at a 105% growth rate for the year, after achieving 147% growth in 2020. I think there's a good chance they will announce a guidance raise around merger time to generate additional interest.
- eToro seems to have the best crypto offering out of all the apps that allows you to trade both stocks and crypto. Robinhood has 7 crypto offerings and eToro has 40. Additionally, eToro was the first stock trading platform to offer Shiba Inu, and I think Webull is now the only other one. Considering crypto and Shiba Inu's recent hype, it should bode well for Q4 earnings.
- Fresh off the unofficial press: it appears that US stock trading will be offered starting in December, which would make for a nice announcement around merger time. Right now, only crypto trading was offered in the US due to regulatory reasons, but it appears that they have approval now. Pretty sure that the US is the biggest stock trading market in the world, and eToro should provide a nice alternative for folks looking to ditch Robinhood alternative but still keep the gamification/nice UI aspect.
- It will likely get solid CNBC coverage upon merger, which is what helped it boom to $15.70 on DA day during a time when DA pops were thought to be dead. If you search "CNBC eToro", you'll see that they've invited eToro's CEO a couple times since to discuss retail trading/crypto trends. I feel pretty excited about this considering what happened with KVSB/KIND. KVSB went to $11.50 upon DA day due to CNBC coverage and $18 after merger for basically the same reason. This suggests that eToro could go above their previous ATH simply due to the same catalyst. Also, a relatively higher portion of people that hear that eToro has gone public should be interested in buying their stock, considering that folks who are familiar with the company are likely active stock market participants.
I'm expecting the merger to take place in December as they've filed their 5th S4 revision on 11/15.
Disclosure and disclaimer (for the bot): I am not a financial advisor, do your own due diligence. Position: 50k commons.