Barclays analyst Benjamin Budish upgraded Robinhood Markets
Over the past several years, Robinhood has transitioned from a meme stock trading platform to a more mature and competitive player against traditional brokerages, reflecting substantial improvement in its underlying business.
The analyst notes that Robinhood's model is maturing, with potential future growth driven by new products (e.g., futures, credit card), geographic expansion (e.g., UK brokerage, EU crypto), and new channels (e.g., institutional through the Bitstamp acquisition).
Despite potential challenges from lower rates or other market factors, Budish now views the risk/reward for Robinhood's stock as more balanced, reversing their previous Underweight rating.
According to the analyst, Robinhood has significantly benefited from favorable retail trading conditions-such as constructive equity markets and high interest rates-which boost trading activity and cash inflows. Additionally, a crypto market recovery has positively impacted the company's financial performance and stock.
For FY24, Budish forecasts the company to report revenues of $2.673 billion, with adjusted earnings per share of 97 cents.
While the analyst acknowledges ongoing near- and medium-term risks to the business, the upgrade rating is supported by improvements in the P&L, a promising product pipeline, and a more reasonable valuation.
Looking ahead, lower interest rates could present a challenge, especially if trading revenues do not provide the anticipated offset, the analyst cautioned.
However, this impact may be mitigated by either expanding product offerings or through geographic expansion, which could increase asset-gathering opportunities, Budish added.
Given that Robinhood's future growth relies on geographic expansion and new product rollouts, the analyst foresees potential increased competition, especially in Europe.
Additionally, there are execution risks as the company strives to achieve product parity with larger competitors.
For FY25, the analyst forecasts the company to report revenues of $2.782 billion, with adjusted earnings per share of $1.02.
Price Action: HOOD shares are trading lower by 3.61% to $18.96 at last check Friday.
