Robinhood Markets has struggled to gain traction among investors this year, but some analysts believe the trading platform's expansion beyond its brokerage roots could fuel a rebound in shares.
Robinhood stock jumped 4.16% to $102.29 Wednesday morning. The stock has fallen 12% this year, putting it on pace for its worst annual performance since 2022, but shares are up 52% since hitting a 52-week low of $65.15 in March, according to Dow Jones Market Data.
Rosenblatt analyst Chris Brendler initiated coverage of Robinhood late Tuesday with a Buy rating and a $135 price target, representing 37% upside from Tuesday's closing price of $98.21. He described the trading platform as a "generational growth story" that "deserves premium valuation."
"Few companies can claim to have changed an entire industry, but Robinhood can," Brendler wrote.
Brendler argued investors underestimate Robinhood's evolution from a commission-free trading app to a broader financial platform. He cited its increasingly affluent customer base, expanded lineup of financial products, and opportunities for international expansion as reasons for optimism.
J.P. Morgan analysts raised their price target for Robinhood to $115 from $103 in a note Tuesday, but maintained a Neutral rating. They also raised their third-quarter adjusted earnings estimate to 57 cents a share from 46 cents a share, citing record equity and option volumes.
Prediction markets have become an important growth driver for Robinhood, J.P. Morgan analysts noted, and the company made "notable progress" moving beyond meme-stock trading.
Still, they questioned the long-term profitability of Robinhood's relatively small customer accounts and warned that growing competition from traditional brokerages and cryptocurrency platforms could threaten the platform's expansion. J.P. Morgan analysts lowered the earnings multiple the firm uses to value Robinhood from 35 times to 32 times, reflecting their growth concerns.
Mizuho analysts were more optimistic about Robinhood's growth prospects in a note Wednesday. They pointed to strong potential demand for perpetual stock futures, which allow investors to bet on share-price movements without owning the stock.
In a Mizuho survey of more than 600 Robinhood users, 94% said they would likely trade the contracts if offered. About 84% of respondents said they would use mostly or entirely new money to do so, suggesting the product could attract additional customer deposits rather than diverting money from existing stock investments.
Robinhood will report third-quarter earnings on Oct. 27.
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