Shares of Robinhood Markets Inc. HOOD slid 6.1% over the past month amid a massive broader market sell-off due to the escalated tariff-related conflicts and rising treasury yields. Though President Donald Trump signaled a potential reduction of tariffs for China, kicking in optimism among investors to some extent, the uncertainties continue to linger.
 
The stock fared better than the industry’s decline of 9.5% over the same time frame. Among its close peers, shares of Charles Schwab SCHW have declined 3.6%, while Interactive Brokers IBKR lost 9.9%.

HOOD’s One-Month Price Performance

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Let’s analyze HOOD’s fundamentals to determine whether to capitalize on the dip or exit now to minimize losses.

HOOD’s Revenue & Product Diversifying Efforts

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 primarily 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’s 9-Quarter Total Net Revenue Trend

Image Source: Robinhood Markets Inc.

Recent initiatives by Robinhood reflect its ambition to become a full-spectrum financial services provider. Last month, the company launched Robinhood Strategies, Robinhood Banking and Robinhood Cortex, a suite of new features, to boost the wealth management offerings for its Robinhood Gold members. Further, it launched the prediction markets hub, allowing customers to trade on the outcomes of several major global events. Initially, the hub will be available across the United States through KalshiEX LLC, a Commodity Futures Trading Commission-regulated exchange.

Event contracts gained traction when Robinhood launched them in October 2024, just before the U.S. Presidential elections. Similarly, Interactive Brokers has been actively expanding its event contract offerings to capitalize on rising demand. Earlier this month, it launched prediction markets in Canada. Like HOOD, it first introduced event contracts in October 2024, starting with the U.S. election results.

Further, this February, Robinhood completed the $300 million acquisition of Gainesville, FL-based TradePMR, a custodial (having $40 billion in assets under administration) and portfolio management platform specializing in services for Registered Investment Advisors. The company gained immediate credibility and resources to cater to wealthier investors seeking advisory solutions. By foraying into the advisory space, the company directly competes with established players like Schwab and Fidelity Investments.

Moreover, in July 2024, 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).
 
Initiatives to change the revenue mix give HOOD solid leverage. The company intends to become a one-stop shop for building generational wealth.

Sales Estimates

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On its first-ever Investor Day conference in December 2024, Robinhood announced plans to expand globally, specifically in Europe and Asia, while introducing services for institutional investors. The company is also developing AI-powered investment tools and exploring Decentralized Finance (DeFi) integration to enhance its offerings.

Nonetheless, concerns have been raised regarding increased regulatory oversight due to the blurred distinction between gambling and trading in the prediction markets hub. Further, foraying into the banking industry amid intense competition keeps investors cautious about its success.

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 regions.

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, there are several cryptocurrencies available on the Robinhood platform, including Bitcoin, Dogecoin, Ethereum, Litecoin, Solana and Toncoin.

HOOD Rewards Shareholders

In May 2024, Robinhood announced a share buyback plan to repurchase 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.

Litigation & Probes Surrounding Robinhood

Robinhood operates in a highly regulated industry and falls under the scrutiny of numerous authorities. This, thus, exposes the company to regulatory risks, resulting in hefty fines and restrictions that may affect its profitability.
 
In March 2025, Robinhood’s units agreed to pay $26 million to settle Financial Industry Regulatory Authority (“FINRA”) allegations for failing to respond to red flags about potential misconduct and not verifying the identities of thousands of customers.

In January 2025, the company agreed to pay a $45 million fine for violating more than 10 securities law provisions. Previously, in September 2024, the company faced a $3.9 million penalty to settle crypto withdrawal failures.
 
In 2023, the company faced defeat in proceedings at the Massachusetts Supreme Judicial Court regarding the supervision of product features and marketing strategies and paid a fine of $7.5 million.

These hefty fines have made investors cautious about the company’s operations and the sufficient internal control procedures.

How to Play Robinhood Stock Now

Over the past month, the Zacks Consensus Estimate for 2025 and 2026 earnings has moved 14.8% and 11.4% downward, respectively. This reflects a bearish sentiment among analysts and suggests subdued growth prospects.

Estimate Revision Trend

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The Zacks Consensus Estimate for HOOD’s earnings implies 16.5% and 16.3% year-over-year growth in 2025 and 2026, respectively. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

HOOD shares are currently trading at a massive premium to the industry. The company has a forward price-to-earnings (P/E) of 33.39X compared with the industry average of 11.46X.

Price-to-Earnings F12M

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Similarly, Schwab and Interactive Brokers have forward P/E ratios of 17.43X and 22.50X, respectively.

Yet, Robinhood’s expansion and diversification efforts will likely help it to grow market share and deepen its global presence. Rising investor demand for cryptocurrency and solid liquidity are other positives.

However, potential regulatory scrutiny, intense competition and uncertainties related to tariffs continue to keep investors apprehensive about Robinhood’s growth prospects. Stretched valuation and bearish analyst sentiments are other concerns. Hence, investors should consider selling the stock at the moment.

At present, Robinhood carries a Zacks Rank #4 (Sell).
 
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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