TLDR
- Robinhood received a ‘Buy’ rating from Compass Point with a $61 price target, citing growth potential in crypto business
- Robinhood’s Q4 crypto revenue surged 700% to $358 million, accounting for one-third of transaction revenue
- The company has potential to generate $665 million from cross-selling to existing customers, including $150 million from staking
- Analysts note a more crypto-friendly regulatory environment with the Trump administration
- HOOD stock has an average upside potential of 78.3% according to analysts, with a consensus “Moderate Buy” rating
Robinhood Markets Inc. (NASDAQ:HOOD) is experiencing a resurgence in its cryptocurrency business, helping the popular trading platform achieve record profitability as digital asset trading volumes rebound. The company, which has become a favorite among millennial investors, is attracting increased attention from Wall Street as analysts see room for expansion in its crypto offerings.
Investment bank Compass Point has initiated coverage of Robinhood with a “Buy” rating and set a price target of $61. This represents a 50% upside from the company’s current trading price. Analysts highlighted increased average revenue from Robinhood’s 12 million crypto users alongside an improving U.S. regulatory environment.
Compass Point analysts believe Robinhood has an opportunity to generate $665 million from cross-selling to existing U.S. customers. This includes the potential to generate $150 million “from staking alone,” according to their research note published on Wednesday.
The bank noted that “HOOD’s crypto business has underearned for its size after taking a cautious approach to U.S. product expansion.” They pointed out that the company’s crypto revenue was “just 19% of exchange giant Coinbase’s non-interest revenue,” suggesting room for growth.
After developing extensive infrastructure for non-U.S. users, Compass analysts believe Robinhood “can launch additional crypto services in the U.S. with limited additional investment.” This expansion potential is a key factor in their bullish outlook on the stock.
Robinhood has already seen the benefits of increased crypto trading activity. In the fourth quarter, cryptocurrency trading revenue skyrocketed 700% to $358 million, up from $45 million a year earlier. This surge accounted for more than one-third of Robinhood’s total transaction-based revenue, which rose over 200% to $672 million.
The crypto trading boom pushed Robinhood’s total Q4 revenue up 115% year-over-year to $1.01 billion. Net income soared more than tenfold during the same period. These results demonstrate how crypto has become a major driver of the company’s financial performance.
In February, the U.S. Securities and Exchange Commission said it was closing an investigation into Robinhood’s crypto arm without seeking enforcement action. This regulatory clarity has removed a cloud of uncertainty that had been hanging over the company’s digital asset business.
Robinhood’s Diversification Strategy
The bullish stance on Robinhood comes amid traditional finance’s surging interest in digital assets. Earlier this week, broker Bernstein started covering Coinbase, setting a nearly 70% upside on the stock. Bernstein cited a more crypto-friendly environment with the election of U.S. President Donald Trump as a key factor.
Deutsche Bank analyst Brian Bedell sees Robinhood as a “good buying opportunity” and has maintained a “Buy” rating on the stock. Bedell noted that the company has been witnessing robust trading momentum, mainly in equities and options. Crypto notional volumes rose over 400% year-over-year, reaching $71 billion in Q4 2024.
BofA Securities remains optimistic about Robinhood’s stock as well, maintaining a “Buy” rating and a price objective of $65.00. The firm noted the platform’s higher retail engagement and strong organic growth. The company has strong growth potential in both the self-directed retail and cryptocurrency sectors globally.
Robinhood closed up more than 6% to trade just over $42 per share on Wednesday amid wider gains in crypto stocks and other risk-on assets. The stock has an average upside potential of approximately 78.3% according to analyst estimates.
The company has recently expanded its product offerings beyond traditional stock trading. Earlier this week, Robinhood launched a prediction market that will allow users to bet on this year’s NCAA basketball tournament, called March Madness. This move represents the company’s efforts to diversify its revenue streams.
Artisan Partners, an investment management company, noted in its Q4 2024 investor letter that “Robinhood has emerged as the go-to-trading platform for millennials, boasting approximately 25 million accounts (versus Charles Schwab’s 34 million).” The firm believes that as Robinhood’s customer base matures and accumulates wealth, the company is well positioned to expand its product offerings.
Based on data from MarketBeat, Robinhood stock has a consensus rating of “Moderate Buy” and an average price target of $61.29. Five analysts have rated the stock with a hold rating, while thirteen have given it a buy rating.
The company currently has a market capitalization of $37.90 billion, with a price-to-earnings ratio of 27.26. Robinhood’s stock has shown strong performance, with a 50-day moving average price of $48.86 and a 200-day moving average price of $36.90.
Robinhood operates a financial services platform in the United States that allows users to invest in stocks, exchange-traded funds, options, gold, and cryptocurrencies. The company offers features such as fractional trading, recurring investments, fully-paid securities lending, margin investing, and instant withdrawals.
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Maisie Morrison