Robinhood Stock Price Soars

Robinhood stock price is firing on all cylinders, supported by the strong equity and crypto markets. HOOD jumped by 206% in 2024, raising its market valuation to over $34 billion. So, is this disruptor a good investment?

Robinhood’s Growth Story

Robinhood Markets is a popular fintech company that successfully disrupted the financial industry. Its business model allows customers to buy stocks, cryptocurrencies, and options through their apps and website.

HOOD introduced commission-free stock trading, a model now embraced by companies like Schwab and Interactive Brokers. It also pioneered gamification, attracting a young audience.

Robinhood primarily profits through Payment for Order Flow (PFOF), where market makers like Virtu Finance and Citadel pay it for directing orders. These market makers operate as wholesale shops and pay Robinhood a commission.

The company has diversified its offerings and is now a significant player in the subscription space. Through Robinhood Gold, the firm charges customers $5 a month and invests their money in safe government bonds, generating predictable income.

Robinhood’s innovation is evident with launches like Robinhood Legend, catering to day traders by allowing buying and shorting assets browser-based. It also offers a credit card providing 3% cashback on all purchases.

These initiatives contributed to Robinhood’s high growth, with annual revenue increasing from $277 million in 2019 to over $2.4 billion in the trailing twelve months (TTM).

Continued Growth for HOOD

Robinhood’s third-quarter results demonstrated ongoing success, with revenue jumping 36% to $637 million. Most revenue arose from transactions, generating over $319 million. Net interest revenue grew to $274 million, supported by higher deposits and interest rates.

The Federal Reserve’s maintained higher interest rates have benefitted companies like Robinhood, with funds under its custody increasing 76% to $152.2 billion. The subscription segment contributed $44 million, propelled by 860,000 Gold subscribers. Analysts forecast continued success, likening the company to Netflix’s model of gradual price hikes.

Analysts predict Robinhood’s revenue could reach $2.74 billion this year and $3.11 billion next year. Its earnings per share (EPS) forecast is $1.14 for this year, rising to $1.30 by 2025. Historically, Robinhood has exceeded analyst forecasts, suggesting potential for better-than-expected performance.

However, there are risks; HOOD thrives when stocks and cryptocurrencies perform well. If stock prices decline, as predicted, there could be a corresponding retreat.

Stock Price Analysis

The weekly chart indicates that HOOD shares bottomed at $7.62 in 2023 and have gradually trended upwards, surpassing the 38.2% Fibonacci Retracement level and the 25-week Exponential Moving Average (EMA).

HOOD is forming a bullish pennant pattern, a positive continuation sign, suggesting it may continue surging in 2024. The next target is around the 61.8% retracement level at $55.30, with a stop-loss at $36, which is 42% higher than the current level.

In summary, while Robinhood stock has 42% upside potential, it also faces key risks.