DBS analyst Ken Shih maintained a Hold rating on Robinhood Markets (HOOD – Research Report) on March 7 and set a price target of $14.50.
Ken Shih has given his Hold rating due to a combination of factors impacting Robinhood Markets. His analysis acknowledges Robinhood’s pioneering role in commission-free brokerage, having captivated a significant market share with over 23 million funded accounts. The company’s strategic move to diversify its offerings, including cryptocurrency trading, debit cards, and retirement accounts, is seen as a positive step towards deepening client relationships and enhancing profitability. Additionally, Robinhood’s plan to expand into the UK market could further bolster its growth trajectory. However, these initiatives are part of a longer-term strategy, and the benefits are expected to materialize in the future.
The Hold rating also reflects the challenges Robinhood faces in achieving profitability. Compared to its peers, Robinhood’s average revenue per user is lower, which has historically resulted in losses. Although the company is projected to become profitable in FY24, this is contingent on successful product expansion, favorable interest rates, and effective cost management. Furthermore, while there has been a recovery in monthly active users, the pace is gradual. The target price of $14.5 is based on a multiple that aligns with historical averages, but there are concerns about market volatility, particularly related to the hype around cryptocurrency, which constitutes a minor portion of Robinhood’s revenue. Considering these factors, Shih’s Hold rating reflects a cautious optimism balanced by the recognition of existing risks and the time required for Robinhood’s strategic initiatives to fully bear fruit.
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Based on the recent corporate insider activity of 134 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of HOOD in relation to earlier this year.
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Robinhood Markets (HOOD) Company Description:
Robinhood Markets Inc is creating a modern financial services platform. It designs its own products and services and delivers them through a single, app-based cloud platform supported by proprietary technology. Its vertically integrated platform has enabled the introduction of new products and services such as cryptocurrency trading, dividend reinvestment, fractional shares, recurring investments, and IPO Access. It earns transaction-based revenues from routing user orders for options, equities, and cryptocurrencies to market makers when a routed order is executed.
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