Robinhood Markets, Inc. HOOD rallied strongly on Monday amid rumors that cryptocurrency exchange FTX could be eyeing acquiring the trading app.
Despite Monday's spike, the stock is still trading at extremely depressed levels.
Robinhood's High-Profile Public Debut: Robinhood, which was among the brokerages that helped democratize trading with their zero-commission trades, was listed on Wall Street on July 29 last year.
The company offered 52.4 shares at $38 apiece as part of its initial public offering, raising close to $2 billion. After opening its debut session at the IPO price of $38, the stock traded in a range of $33.35-$40.25 before ending at $34.82.
The stock quickly ran up to a post-IPO high of $85 on August 4, before beginning to moderate. Some of the buoyancy seen during the time is attributable to meme currency Dogecoin's DOGE/USD run. It was just ahead of Robinhood's listing that Doge had run up to its all-time high of $0.737567.
Robinhood-Doge Moves Correlate Around that time, Robinhood was heavily reliant on cryptocurrencies in general and Doge in particular for its revenue. In its earnings report for the second quarter of 2021 released in mid-August, Robinhood said cryptos made up 52% of transaction-based revenue, with Doge accounting for 62% of the crypto revenue.
Robinhood at the time allowed trading in a handful of long-established cryptocurrencies, including Bitcoin BTC/USD and Dogecoin among a group of six. The trading app has since significantly expanded its crypto offerings.
The chart comparing the Doge's move and Robinhood's stock show that these two were perfectly correlated for a brief period in October 2021.
Robinhood stock has been on a secular decline since late-September 2021. The pullback reflected the company's fundamentals, which deteriorated amid the crypto market downturn. The latest quarterly results released in late April showed year-over-year declines in revenue and monthly active users, and a wider loss.
The equity market weakness seen for most of the half-year in 2022 has made matters worse for the company.
Robinhood's market cap has declined notably from a peak of around $71 billion to $7.6 billion. The continued slide in cryptocurrencies has snuffed out hopes of a turnaround in the near term.
Returns Could Be Alluring If HOOD Claws Back: Robinhood's reversal of fortune is closely tied to the financial markets, especially the cryptocurrency market. If sentiment reverses and the markets rebound, Robinhood stock could be in a for a recovery.
A $100 investment in Robinhood stock now could fetch an investor roughly 11 shares. If the stock can reclaim its all-time highs, the same 11 shares will be valued at $935. This represents a return of about 835% for those investors reposing their faith in Robinhood stock.
Price Action: Robinhood closed Monday's session at $9.12, up 14%, according to Benzinga Pro data.
Photo: Created with an image from Diverse Stock Photos on Flickr
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