Robinhood (HOOD) Stock Jumps 14% on Market Rally and Analyst Upgrades

TLDR

• Robinhood stock jumped 14% Friday to $82.82 after a brutal multiday selloff, though shares remain down 46% from their October high of $152
• The company generates 36% of transaction revenue from crypto trading, making it vulnerable to Bitcoin’s 50% decline from its October peak
• Q4 earnings due Tuesday are expected to show strength in equity and options trading, with margin debt hitting a record $1.2 trillion in December
• Robinhood’s “super app” expansion into credit cards, banking, and financial advice remains early stage, contributing only $40 million of $1.1 billion in net interest revenue
• Prediction markets revenue faces sustainability questions as NFL season ends, with football representing roughly half of prediction market volumes

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Robinhood stock climbed 14% Friday to $82.82, providing relief after a punishing decline that saw shares drop 46% from their all-time high of $152 on October 9. The rebound came on heavy volume, with 53.9 million shares traded compared to the average 27.8 million.

Robinhood Markets, Inc., HOOD

The rally followed a broad market lift led by Nvidia, which jumped 7%. Positive analyst commentary also helped drive the recovery, with upgrades citing diversification into subscriptions and net interest revenue that could boost Q4 results.

But the stock’s volatile ride reflects deeper challenges. Bitcoin’s crash has hit Robinhood hard.

Crypto Exposure Weighs on Revenue

For the nine months ending September 30, Robinhood generated $1.85 billion in transaction-based revenue. Crypto trading accounted for $680 million, or roughly 36%.

Options trading brought in $809 million during the same period. This crypto dependency makes the stock vulnerable to digital asset swings.

The company reports Q4 earnings Tuesday. Analysts expect the results will show strength in equity and options trading.

Total margin debt reached a record $1.2 trillion in December, according to Finra data. Individual investors have been borrowing money to trade stocks during the bull market.

The S&P 500 sits flat for the year. Piper Sandler analyst Patrick Moley flagged “growing uncertainty about the sustainability of recent retail trading strength” as a factor in Robinhood’s selloff.

Moley maintains an Overweight rating with a $155 price target. He calls Robinhood “the best way to play secular growth in retail trading” and believes it’s the closest fintech platform to achieving “super app” status.

Truist lowered its price target to $130 from $155 but kept a Buy rating. KeyCorp raised its target from $135 to $155.

New Business Lines Show Promise But Remain Small

Robinhood has been expanding beyond trading into credit cards, banking, and financial advice. The company wants to become customers’ primary financial platform.

These efforts may help offset trading revenue declines. But they’re still nascent.

Credit cards contributed just $40 million to the $1.1 billion in net interest revenue for the nine months ending September 30. J.P. Morgan analyst Kenneth Worthington rates the stock Neutral, noting “a meaningful gap between the products offered and scale of Robinhood versus its larger competitors.”

Prediction markets have been the fastest-growing new product. The platform lets investors bet on event outcomes through binary yes/no contracts.

College and professional football made up roughly half of prediction market volumes from September to January, Moley estimates. The NFL season ends Sunday with the Super Bowl.

Questions remain about whether prediction market revenue will hold up. Will football bettors show the same enthusiasm for basketball or the Winter Olympics?

Recent insider selling has also raised eyebrows. Steven Quirk sold 52,540 shares at $87.81 on February 3.

Daniel Martin Gallagher Jr. sold 10,000 shares at $87.07 the same day. The transaction represented a 2.48% decrease in Gallagher’s ownership.

Approximately 93.27% of Robinhood stock is owned by institutional investors. The company’s market cap stands at $74.47 billion with a P/E ratio of 34.37.

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