Why Etoro Stock Is Plummeting This Week

Etoro (NASDAQ: ETOR) stock is falling this week despite a better-than-expected second-quarter report. The trading platform specialist's share price was down 17.9% in the week's trading heading into Friday's market open.

Etoro published its Q2 results on Aug. 11 and reported sales and earnings for the period that topped Wall Street's forecasts. On the other hand, investors are taking a cautious approach to the company's near-term outlook and to the announcement of a significant acquisition.

Etoro sinks despite Q2 beats

Etoro recorded non-GAAP (adjusted) earnings of $0.68 per share on sales of $229 million in the second quarter. The average analyst estimate called for adjusted earnings per share of $0.61 on revenue of roughly $225.7 million. Revenue in the period was up 9% year over year, and adjusted income increased roughly 17% to $63 million.

Investors aren't sure about Etoro's new acquisition and outlook

With its Q2 report, Etoro announced that it will be buying U.S. trading platform TradeZero in a $231 million deal. Investors and analysts appear to be split on the value of the move, and multiple investment firms noted some uncertainty surrounding the deal as a factor in lowering their price targets on the stock.

Additionally, some analysts were concerned about the key performance metrics that the company shared for July. While funded accounts rose 18% year over year in the month to reach 4.32 million, assets under administration declined 5% year over year to $18.5 billion.

Cryptocurrency activity saw substantial drawdowns, and trading activity for capital markets and equities, commodities, and currencies was flat. With trading momentum on the platform decelerating and some questions about the TradeZero acquisition, Etoro could remain under pressure in the near term.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.