Robinhood Markets Inc HOOD will be reporting its first-quarter earnings on Wednesday. Wall Street expects 5 cents in EPS and $548.607 million in revenues as the company reports after market hours.
The stock is up about 100% over the past year, +39.56% year-to-date.
JPMorgan Questions Sustainability Of Growth At Robinhood
The Robinhood Analyst: JPMorgan analyst Kenneth B. Worthington, CFA has an Underweight rating on Robinhood stock with a price target of $12.
The Robinhood Thesis: Worthington believes that while Robinhood has been innovative and successful in the US retail broker market, its growth may not be sustainable in the long term.
“We do not see growth as sustainable, and we question the ability of the company to generate competitive margins,” he said, citing the company’s focus on small accounts that may not be very profitable, as a key reason.
However, he acknowledges that Robinhood’s expected move to profitability in 2024 is a positive sign, particularly as long as interest rates remain elevated. Despite a strong performance in 1Q24, with increased volumes across equities, options, and crypto, Worthington maintains the Underweight rating due to concerns about Robinhood’s transaction-based model and its ability to consistently generate profits with lower customer asset levels.
Let’s now look at what the charts indicate for Robinhood stock, and how the stock currently maps against Wall Street estimates.
Near-Term Momentum Building For Robinhood Stock Ahead Of Q1 Earnings
Robinhood stock is trading above its short to medium-term moving averages, which is generally considered bullish for a stock.
While Robinhood stock is at $17.83, the eight-day, 20-day and 50-day simple moving averages (SMAs) are trailing behind at $17.44, $17.47 and $17.70, respectively.
The oscillators too, suggest bullish momentum taking over.
The Moving Average Convergence Divergence (MACD) is at -0.01, however treading upwards towards the signal line which is in positive territory at 0.03. A crossover of the MACD line over the signal line would suggest a change in momentum from bearish to bullish.
The RSI at 52.86 lies in the Neutral category, suggesting the stock is neither overbought nor oversold.
The Bollinger Bands have the Robinhood stock price line within them. The price has recently moved from the lower (bearish) Bollinger band to the upper (bullish) bollinger band, suggesting bullish sentiments are settings in.
Investors must note that these near-term signals could be momentum driven as the company heads towards reporting Q1 earnings.
While JPMorgan remains Underweight Robinhood stock, let’s look at overall analysts consensus as well.
Also Read: SEC Nudges Robinhood Over Crypto Operations
Robinhood Analysts See 17.51% Downside
Ratings & Consensus Estimates: The consensus analyst rating on Robinhood stock stands at an Underweight currently with a price target of $16.59. The most recent analyst ratings for Robinhood stock were released by Needham, Mizuho, and Keybanc, April 22 onwards. These ratings suggest an average price target of $14.67, indicating a potential downside of -17.51% for the company’s stock.
The overall expectations with Robinhood stock appear Neutral to Bearish. While the short-term may see an earnings momentum-driven surge in the stock price, catalysts to sustain a long-term rally haven’t appeared yet.
Price Action: Robinhood stock closed the trading day, Monday at $17.78, down 0.95%.
Read Next: Robinhood Receives Wells Notice From SEC Over Crypto Business
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