HOOD Stock Soars 13% in a Week: Buy the Recovery or Hold Back?

Shares of Robinhood Markets Inc. HOOD jumped 13% last week, recouping some of the lost value in the major broader market sell-off that started in the last week of February. The rise coincided with the company’s announcement of the launch of a prediction markets hub directly within the Robinhood app. Rating upgrades from two investment firms also lifted investor sentiments.

Despite solid performance last week, HOOD stock is still down 3.4% in the past month. The stock fared better than the industry’s decline of 5.6%. Among its close peers, shares of Charles Schwab SCHW have declined 0.8%, while Interactive Brokers IBKR lost 13.7%.

HOOD’s One-Month Price Performance
 

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Let’s analyze HOOD’s fundamentals to determine whether now is the time to buy or wait.

HOOD’s Revenue & Product Diversifying Efforts

Robinhood became extremely popular among younger generations in early 2021, riding on the meme stock wave. Nonetheless, since its IPO in July 2021, a lot has happened on the business front. 

Robinhood has evolved from a brokerage firm mainly trading in digital assets to a more mature and diversified entity, striving to widen its market and reach. Looking at the numbers, in 2021, HOOD majorly depended on transaction-based revenues (almost 75% of total revenues) to generate income. In 2024, this came down to nearly 56%. 

HOOD’s 9-Quarters Total Net Revenue Trend
 

Image Source: Robinhood Markets, Inc.

Recent initiatives by the company reflect its ambition to become a full-spectrum financial services provider. Last week, the company announced the launch of a prediction markets hub, allowing customers to trade on the outcomes of several major global events, including the expected upper limit of the Federal Reserve funds rate in May. Initially, the hub will be available across the United States through KalshiEX LLC, a Commodity Futures Trading Commission-regulated exchange.

Event contracts gained traction when Robinhood launched it in October 2024, just before the U.S. Presidential elections. Similarly, IBKR has been actively expanding its event contract offerings in recent months to capitalize on rising demand. It also first introduced event contracts in October 2024, starting with the U.S. election results.

Further, in February, Robinhood completed the $300 million acquisition of TradePMR, a custodial and portfolio management platform specializing in services for Registered Investment Advisors. With Gainesville, FL-based TradePMR’s top-ranked platform and $40 billion in assets under administration, the company will gain immediate credibility and resources to cater to wealthier investors seeking advisory solutions. By foraying into the advisory space, the company now directly competes with established players like SCHW and Fidelity Investments.

Moreover, in July 2024, Robinhood acquired Pluto Capital Inc. With the integration of Pluto’s advanced capabilities, the company is set to revolutionize the investment experience for its users. Also, as part of a diversification effort, HOOD launched a credit card (expanding in the consumer finance space) and a desktop trading platform (catering to more sophisticated traders). 

Initiatives to change the revenue mix give HOOD solid leverage. The company intends to become a one-stop shop for building generational wealth.

Sales Estimates
 

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Further, during its first-ever Investor Day conference in December 2024, Robinhood announced plans to expand internationally, particularly in Europe and Asia, while introducing services for institutional investors. The company is also developing AI-powered investment tools and exploring Decentralized Finance (DeFi) integration to enhance its offerings.

Crypto: A Vital Tailwind for Robinhood

Robinhood’s plans to focus on the cryptocurrency space through increased tokenization, enhanced capabilities and expansion into the EU markets will lead to further cost efficiency. Currently, it operates in four countries with regulatory authorizations. It has been applying for Markets in Crypto-Assets Regulation (MiCA) licenses that would enable it to offer crypto services in European Economic Area member states, boosting its presence in 27 new regions.

The company’s planned acquisition of Bitstamp (announced in June 2024) complements this theme. Bitstamp's core spot exchange, which features more than 85 tradable assets and is popular in Europe and Asia, will significantly enhance Robinhood’s crypto offerings.

This will support Robinhood’s cryptocurrency revenues as new investors will be attracted to cryptocurrencies to boost their returns and leverage the benefit of diversification as an asset class. At present, the total number of cryptocurrencies listed on its platform is 19.

HOOD Rewards Shareholders

In May 2024, Robinhood announced a share buyback plan to repurchase up to $1 billion of its outstanding common stock. While the plan has no expiration date, the company expects to buy back shares within two to three years. As of Dec. 31, 2024, roughly $743 million worth of authorization remained available for repurchase.

Robinhood is on solid ground, with significant cash reserves. As of Dec. 31, 2024, it reported cash and cash equivalents of $4.84 billion.

How to Play Robinhood Stock Now

Over the past month, the Zacks Consensus Estimate for 2025 and 2026 earnings has moved upward. This reflects a positive sentiment among analysts and suggests encouraging prospects. 

Estimate Revision Trend 
 

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The Zacks Consensus Estimate for HOOD’s earnings implies 36.7% and 12.3% year-over-year growth for 2025 and 2026, respectively.

HOOD’s Earnings Estimates
 

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Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

The company shares are currently trading at a massive premium to the industry. The company has a forward price/earnings (P/E) of 28.96X compared with the industry average of 12.73X.

Price-to-Earnings F12M
 

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Robinhood is on the right path to expand/diversify operations. Its initiatives to keep adding new products and services and plans to become a global entity by venturing across Europe and Asia Pacific regions, organically and through acquisitions, align with its expansion efforts. The positive sentiments of analysts are echoed in the upward estimate revision trends. 

While high valuation could act as a deterrent, the changing regulatory landscape under the Trump administration will support HOOD immensely. Hence, now is the perfect time to buy this stock.

At present, Robinhood carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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