Robinhood Markets (HOOD -1.63%) made Wall Street's best and brightest look painfully slow this week. Analysts predicted the popular online brokerage would earn only $0.05 per share in its first quarter of 2024, but Robinhood thumped that forecast, reporting an $0.18 per-share profit -- and record revenue of $618 million.
Investors yawned. Robinhood stock actually fell Thursday on Wednesday's news and kept on falling through the close of trading on Friday. But one analyst at least, JMP Securities' Devin Ryan, thinks this lack of enthusiasm could actually be a buying opportunity and predicts Robinhood stock will shoot up to $30 within a year, according to The Fly.
Is Robinhood stock a buy?
Suffice it to say Robinhood's results wowed Ryan entirely, with sales rising faster than expected, and costs slower. Revenue roared ahead 40% year over year, helped by a 42% increase in subscribers to Robinhood's "Gold" suite of investing tools. (Gold membership also gives subscribers a premium 5% interest rate on their uninvested cash -- an attractive perk that helps to explain the enthusiasm).
For these and other reasons, Ryan thinks the stock is a "buy" as Robinhood posts faster and faster growth in both customer count and deposits. But is this growth fast enough to make Robinhood stock a buy?
Perhaps.
Consider: Robinhood is just barely profitable right now, earning only $127 million over the past year -- and with negative free cash flow. Most analysts agree, though, that Robinhood is on track to earn a $0.51 per-share profit based on generally accepted accounting principles (GAAP) this year, which would value the stock at about 33 times earnings at its current share price. That's pricey, but if Robinhood can keep growing earnings at 40%, the valuation would be more than justified.
Admittedly, getting to $30 a share, as Ryan predicts, is more of a stretch. That share price would value Robinhood at nearly 60 times earnings. Even with 40% growth, I wouldn't pay $30 a share for Robinhood stock.
