'Robinhood Is Not A Meme': Analysts Initiate Coverage Of HOOD Stock Following Quiet Period


Robinhood Markets Inc HOOD shares rebounded by 2.5% on Monday after the stock tanked last week on disappointing commentary from the company about the third quarter.

Overall, Robinhood is still off to a hot start on the public market after pricing its IPO at $38 in late July.

Robinhood reported a net loss of $502 million in the second quarter on $565 million in revenue, up 131% from a year ago.

However, the stock tanked following the earnings report thanks to a couple of red flags that concern Wall Street analysts. Revenue from cryptocurrency transactions made up 52% of Robinhood’s total transaction-related revenue in the quarter, and 62% of Robinhood’s total crypto revenue came from joke currency Dogecoin DOGE/USD.

Robinhood management also said that the company expects “we expect seasonal headwinds and lower trading activity” to weigh on revenue and account growth in the third quarter.

Several of Robinhood’s IPO underwriters finally weighed in on the stock on Monday following a mandatory quiet period.

Risks Ahead For Robinhood: Piper Sandler analyst Richard Repetto said Robinhood has revolutionized retail trading, but its regulatory and growth risks are significant at this point.

“While we believe any regulatory changes to [payment for order flow] should be balanced against the retail advancements that have resulted, still regulatory decisions are often unpredictable,” Repetto wrote.

Mizuho analyst Dan Dolev said “Robinhood is not a meme.”

“We believe a TAM of 500mn US bank accounts, 2x ARPU upside potential, success in cash management, and becoming a single money app make HOOD attractive,” Dolev wrote.

Diversification Opportunities For Robinhood: JMP analyst Devin Ryan said Robinhood is a leader in the next generation of financial services.

“While the firm’s growth has not been without controversy at moments, we believe it has been battle-tested and prevailed numerous times, highlighting that it is not wise to bet against Robinhood or the retail community it serves,” Ryan wrote.

KeyBanc analyst Josh Beck said Robinhood is on a path to diversifying its business via different fintech aspirations over time.

“Robinhood is democratizing investing for an emerging generation en route to establishing a more fully-fledged FinApp leveraging disruptive technology principles effectively bending the CAC curve (<1/10th) driven by viral internet-like scaling in a ~$60T TAM,” Beck wrote.

Robinhood Ratings, Price Targets:

  • Piper Sandler has a Neutral rating and $47 target.
  • Mizuho has a Buy rating and $68 target.
  • JMP has a Market Outperform and $58 target.
  • KeyBanc has an Overweight rating and $55 target.
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Posted In: Analyst ColorPrice TargetInitiationTop StoriesAnalyst RatingsTrading IdeasDan DolevDevin RyanJMPJosh BeckKeyBancmizuhoPiper SandlerRichard Repetto
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