Robinhood Markets shares soared Thursday after the retail-focused brokerage disclosed a sharp increase in trading volume in February and received glowing guidance from Mr. Bernstein.
Robinhood said late Wednesday that stock trading volume reached $80.9 billion last month, up 36% from January and 41% year over year. Robinhood's crypto trading volume last month was $6.5 billion, a 10% increase from January levels and an 86% rebound year-over-year. This increase in trading volume will have a significant positive impact on Robinhood, as the core of the broker's business remains transaction-based revenue, and crypto trading tends to be more profitable than stocks.
Robinhood stock rose 6% Thursday afternoon. The stock is already up about 43% so far this year.
The latest figures show how much retail investors have returned to the market amid the stock rally so far.
S&P500
It's up 15% in the past six months, and popular stocks like NVIDIA are soaring. The numbers also confirm the impressive recovery seen across digital assets. In 2023, trading volumes slumped as investors headed for the mountains during a brutal and prolonged bear market.
Bitcoin
and other tokens.
Bitcoin is up about 75% since the beginning of the year, largely due to billions of dollars flowing into the Spot Bitcoin Exchange Traded Fund (ETF) approved by the Securities and Exchange Commission in January. While these ETFs have been a key part of Bitcoin's price movement, it's also clear that retail traders continue to flock to Robinhood, a trend that bodes well for crypto-native peer Coinbase Global. It's an omen.
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Wall Street is also paying attention. “This month's results show Robinhood continues to gain share in both trading and industry assets as it further expands its product set and geographic reach,” Mizuho analyst Dan Dolev said in a note. “This confirms our view,” and set a price target of $17 to $20.
Others shine even brighter. Bernstein analyst Gautam Chughani initiated coverage on Robinhood with an outperform and $30 price target, with a thesis largely based on a “crypto comeback arc,” he said Thursday. I wrote it in my notes.
“Buyers and sellers alike are refusing to see what we are seeing: the monster of a 2024-2025 crypto cycle,” Chugani wrote, adding that the market capitalization of digital assets It added that it expects the amount to rise from $2.6 trillion to $7.5 trillion over the period. Chughani said Bitcoin's market capitalization could increase from its current $1.4 trillion to $3 trillion by 2025, more than doubling from its all-time high of over $70,000. I predicted that it would mean an increase.
“Robinhood’s full suite of crypto services within a regulated brokerage platform is well-positioned given its captive base of 11 million active traders, who are young, active, independent and “The Robinhood service has strong compatibility with the market,'' Chughani wrote, adding that Robinhood's services: Competitive rates with crypto exchanges like Coinbase
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Bernstein's estimate for Robinhood is incredibly bullish. The broker expects its revenue to double over the next two years, with more than 70% of the growth coming from cryptocurrency fees, and digital assets expected to account for 40% of revenue by 2025. This will increase from the current level of less than 10%. “Equity returns and other asset-based returns are not significantly above consensus,” Chugani said.
These crypto revenue estimates are about five times higher than consensus, and Bernstein's forecast for 2025 net income of $910 million is three times higher than the average of analysts surveyed by FactSet. More expensive than that. Chugani's forecast for Robinhood's revenue to exceed $3.4 billion by the end of fiscal year 2025 also beats consensus by about 50%.
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What does this mean for Robinhood stock? Well, the stock could already be extended at its current valuation. The stock trades at more than 75 times next year's expected earnings, representing a premium of more than 300% to its peers, according to FactSet data. Chugani's $30 price target is based on target multiples of 7.8x 2025 revenue and less than 30x 2025 earnings, which is “in line with average crypto/brokerage/fintech multiples. ”.
“In short, we are bullish on cryptocurrencies,” Chugani wrote. “We believe the resurgence of Robinhood’s crypto business will once again restore its fortunes with investors…We believe Robinhood will continue to ride the crypto-led earnings modulation and continue its two-year cyclical I see it as a deal.”
Email Jack Denton at jack.denton@barrons.com.
