Despite a nearly 12% decline since its earnings miss, some major investors and analysts view Robinhood (HOOD) as poised for recovery. The company reported weaker-than-expected first-quarter results primarily due to subdued crypto trading activities on April 28, leading to an immediate stock price drop. However, Cathie Wood’s Ark Invest bought approximately $39.7 million worth of shares the following day, reflecting confidence in Robinhood’s prospects. This investment accounts for roughly 3% across all three of Ark’s funds, positioning it as a top holding.
Wall Street analysts also perceive the earnings miss as a temporary setback, citing early April data that suggests improving trends. They noted rising equity and options trading volumes, which may counterbalance ongoing crypto market softness. Cantor Fitzgerald maintained its ‘Overweight’ rating with a $110 target price, observing signs of stabilization in trading activities. “April’s preliminary equity/option trading volumes are trending towards the highest levels this year,” they remarked, attributing the earnings miss more to broader market conditions than company-specific issues.
Compass Point supports this optimistic outlook by sustaining a ‘Buy’ rating and adjusting its price target slightly to $107, labeling the market response as “backwards looking.” Analysts anticipate stronger performance in the upcoming quarter. Despite bullish sentiments from some quarters, concerns remain regarding crypto trading risks, which could affect near-term results due to lower volumes and pricing pressures.
Keefe, Bruyette & Woods (KBW) expressed caution by reducing its stock target further to $65 from $75, warning of potentially persisting declines in transaction fees. They noted a consistent drop in both crypto and options take rates into the second quarter, leading to downward revisions in long-term earnings forecasts through 2028.
Nevertheless, Bernstein analysts maintained their ‘Outperform’ rating with a $130 target, pointing to stabilizing crypto activity as April showed no further declines while equities and options remained robust. Attention is now shifting towards new revenue avenues, such as prediction markets. Firms are keen on this emerging sector, highlighting growth in event-based contracts and upcoming catalysts like product launches and global events.
Robinhood’s planned platform, Rothera, could drive future revenue and margin expansion, according to Cantor. The immediate outlook depends on whether recent trading activity gains persist. If they do, Robinhood might achieve growth sooner than anticipated; otherwise, transaction revenue pressure may continue into the latter half of the year.
While Robinhood’s stock rose approximately 3% on Thursday, it has fallen about 37% over the year. In contrast, its crypto peer Coinbase (COIN), often trading in tandem with Robinhood, experienced a 3% rise on the day and is down roughly 19% for the year.