Why I’m Betting on Robinhood ($HOOD): The Bull Case for 2024 and Beyond

Robinhood ($HOOD) has caught my attention lately, and after digging into the numbers and seeing where the company is heading, I’ve decided to open a position. It’s not perfect—there are risks—but the growth story makes me think it’s worth the shot. Let’s break it down.

The Q3 2024 numbers are solid. Robinhood reported $637 million in revenue, a 36% jump compared to last year. Their earnings per share (EPS) came in at $0.17, up $0.26 from the same time in 2023. Not bad at all.
On the trading front, it’s not just one segment doing well. Stock trading volumes grew 65%, crypto trading volumes shot up 112%, and options trading climbed 47%. Growth like that across the board is rare.

If you’re interested in other companies with rapid growth potential, check out KULR Stock Analysis: NASA, Bitcoin, and Key Risks.

Yes, the valuation is high. The P/E ratio is 70.63—way above the industry average of 16. But when you look at the PEG ratio (price-to-earnings-to-growth), it’s 0.39, which suggests the valuation is actually reasonable given their growth. That’s a big reason I’m okay with the price tag.

For another take on valuation in the tech sector, check out GitLab (GTLB): Overvalued or a Hidden Gem?.

The analysts seem to agree with this take.

• Morgan Stanley upgraded the stock to “Overweight” with a price target of $55.
• Goldman Sachs gave it a “Buy” rating with a $46 target.
• Barclays joined in with an “Overweight” upgrade and a $49 target.

The average target is $37.19, but the recent upgrades show there’s confidence in more upside.

If you’re just starting out and want to learn more about investing with Robinhood, take a look at How to Invest $1,000: A Robinhood Guide.

This is where it gets interesting. Robinhood isn’t just sitting around waiting for its current model to peak.

• AI tools: They’re rolling out features to help users make smarter trading decisions. That could keep current users engaged and bring in more advanced traders.
• Wealth management: They just spent $300 million to acquire TradePMR, adding $40 billion in assets under administration. This is a big move into the Registered Investment Advisor (RIA) market.
• Desktop trading platform: With their new “Legend” platform, they’re targeting advanced traders who prefer desktop tools.

They’re clearly expanding beyond their traditional user base.

Crypto is a big part of this story. In Q3 2024, crypto trading volumes were up 112% year-over-year. With Trump’s second term likely bringing more crypto-friendly regulations, Robinhood could see this segment grow even further. Crypto is risky, but when the market is up, Robinhood benefits big time.

For more insights into companies leveraging market trends, you might find Marvell Technology Q3 Earnings Analysis worth reading.

Every stock has risks, and Robinhood isn’t an exception.

• Regulatory scrutiny: Payment-for-order-flow, which is a major revenue source, is still under the microscope. If regulators crack down, it could hurt their business model.
• Market volatility: A slowdown in trading activity could impact revenue.
• Competition: Traditional banks and other fintech platforms are stepping up. Robinhood’s ability to keep innovating will be critical.

For me, yes. Their revenue and trading volume growth, push into AI and wealth management, and crypto potential make it a strong midterm play. The valuation is high, but the growth they’re delivering justifies it. I’m okay with the risks because I think the potential reward is worth it.

I’m opening a position because I believe in the growth story. Sure, there’s some volatility, but the numbers and moves Robinhood is making give me confidence. I’ll keep an eye on their next earnings report, especially crypto volumes and AI adoption. For now, though, I’m in.

Original Tweet 👉