What Happened?

Shares of financial services company Robinhood (NASDAQ:HOOD) fell 5.3% in the morning session after Wolfe Research analysts downgraded the stock's rating from Buy to Hold, citing valuation concerns. The analysts added, "Since our June upgrade, key drivers underpinning our upside (bull) case have largely played out and are now reflected in the current valuation / share price."

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What The Market Is Telling Us

Robinhood’s shares are extremely volatile and have had 38 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 6 days ago when the stock gained 15.3% on the news that the company reported strong fourth quarter 2024 results, which blew past analysts' revenue, EPS, and EBITDA expectations. Specifically, cryptocurrency trading revenues soared by 700%+ year-on-year while equities and options increased by 144% and 83%, respectively - note that crypto and options trading are more profitable business lines than equities due to the wider spreads. 

Margins expanded significantly, with net income jumping over tenfold to $916 million, while earnings per share more than tripled from the previous year, benefiting from higher trading volumes. 

Looking ahead, management sees continued momentum, with a focus on expanding its crypto offerings and international reach, particularly in the Asia-Pacific region. Zooming out, we think this was a good quarter with some key areas of upside.

Robinhood is up 57.8% since the beginning of the year, and at $62.25 per share, has set a new 52-week high. Investors who bought $1,000 worth of Robinhood’s shares at the IPO in July 2021 would now be looking at an investment worth $1,788.

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