Over the past week, shares of Robinhood Markets Inc. HOOD have plunged 24%, paring back some of this year's gains. This decline coincides with waning investor enthusiasm for cryptocurrency, broader macroeconomic uncertainty stemming from widespread Trump tariffs and the recent hack of the crypto derivatives exchange Bybit.

The crypto rally seems to be losing momentum, with Bitcoin currently trading below the $90,000 mark, despite optimism within the crypto industry about a pro-crypto Trump administration and a more favorable stance taken by regulators. The weakness in the crypto industry persisted despite the positive development of the past few days. Recently, Coinbase Global COIN and Robinhood announced the dismissal of a lawsuit and closure of a probe related to the crypto business by the Securities and Exchange Commission (“SEC”). 

Additionally, on Feb. 21, Bybit, one of the biggest cryptocurrency exchanges, revealed that hackers drained nearly $1.5 billion in digital assets in the largest crypto heist in history. This shook investors’ confidence in the level of security at the cryptocurrency exchange and added to the negative sentiments surrounding the crypto market.

With crypto-related stocks like Robinhood and COIN under pressure, does this sell-off present a perfect buying opportunity before a potential rebound? Let’s analyze HOOD’s fundamentals to determine whether now is the time to buy or wait.

HOOD Ventures Beyond Trading to Diversify Revenue

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 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. In November 2024, Robinhood announced the $300 million acquisition of TradePMR, a custodial and portfolio management platform specializing in services for Registered Investment Advisors. By foraying into the advisory space, the company will directly compete with established players like Charles Schwab SCHW, LPL Financial LPLA and Fidelity Investments.

Additionally, in July, 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). Further, the company started offering futures, index options and election betting contracts, widening its market appeal.

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

Robinhood Sales Estimates
 

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Further, during its first-ever Investor Day conference on Dec. 4, Robinhood announced plans to expand internationally, particularly in Europe and Asia, while introducing services for institutional investors. The company is 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 geographies.

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. The company’s board of directors approved a share repurchase program, authorizing it to buy back 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.

Robinhood Stock: A Golden Buying Opportunity

Despite the recent sell-off, Robinhood shares have surged 23.2% this year, significantly outperforming the financial investment bank industry’s rally of 5.8%. In contrast, its peers – SCHW and LPLA – are up just 6.7% and 9.4%, respectively, in the same time frame.

YTD HOOD Stock Price Performance
 

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

HOOD Earnings Estimate Revision Trend 
 

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The Zacks Consensus Estimate for HOOD’s earnings implies 38.5% and 12.7% year-over-year growth for 2025 and 2026, respectively.

Earnings Estimates
 

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

Given the robust stock price performance, the company shares are trading at a massive premium to the industry. At present, the company has a forward price/earnings (P/E) of 29.89X compared with the industry average of 13.46X.

Price-to-Earnings Ratio 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 buyouts, 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 before it surges again.

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

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The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report

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Robinhood Markets, Inc. (HOOD) : Free Stock Analysis Report

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

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