TLDR
- Robinhood received a ‘Buy’ rating from Compass Point with a $61 price target, highlighting 50% upside potential
- Compass Point estimates Robinhood could generate $665 million from cross-selling to existing U.S. customers
- Robinhood’s crypto revenue soared 700% in Q4 2024, pushing overall revenue up 115% year-over-year
- The SEC recently closed an investigation into Robinhood’s crypto arm without seeking enforcement action
- Deutsche Bank and BofA Securities maintain “Buy” ratings, with BofA setting a $65 price target
Robinhood Markets Inc. has received a “Buy” rating from investment bank Compass Point, which set a price target of $61 for the popular trading platform. This represents a 50% upside from its current trading price of around $42 per share.
In a note released Wednesday, Compass Point highlighted the increased average revenue from Robinhood’s 12 million crypto users. The bank also pointed to an improving U.S. regulatory environment as a factor in its positive outlook.
The investment bank estimates that 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.”
“HOOD’s crypto business has underearned for its size after taking a cautious approach to U.S. product expansion,” Compass wrote in its analysis.
The note mentioned that the company’s crypto revenue was “just 19% of exchange giant Coinbase’s non-interest revenue.”
Compass Point believes Robinhood can launch additional crypto services in the U.S. with limited additional investment. This is possible because the company has already developed extensive infrastructure for non-U.S. users.
The positive coverage from Compass Point reflects traditional finance’s growing interest in digital assets. More investors are considering these assets as part of their portfolios.
Crypto-friendly environment
Earlier this week, broker Bernstein started covering Coinbase. They set a nearly 70% upside on the stock, citing a more crypto-friendly environment following the election of U.S. President Donald Trump.
Robinhood, based in Menlo Park, California, closed up more than 6% on Wednesday. The stock traded just over $42 per share amid wider gains in crypto stocks and other risk-on assets.
The company’s share price had been under pressure in recent weeks. This was due to growing fears about a potential trade war that could lead to stagflation – a combination of sluggish economic growth and rising prices.
Robinhood has benefited from several positive developments recently. In February, the company reported that its fourth-quarter crypto trading revenue increased by 700%. This surge helped push overall revenue for the period up 115% year-over-year.
Later that month, the U.S. Securities and Exchange Commission announced it was closing an investigation into Robinhood’s crypto arm. The SEC decided not to seek any enforcement action against the company.
This week, Robinhood launched a prediction market feature. The new offering will allow users to bet on this year’s NCAA basketball tournament, known as March Madness.
Compass Point noted that Robinhood’s “crypto users provide attractive liquidity for institutional traders.” This suggests the platform’s growing user base could attract more institutional participation.
Analyst maintains a Buy rating
Deutsche Bank analyst Brian Bedell also views Robinhood as a good buying opportunity. He has maintained a “Buy” rating on the stock, citing encouraging growth and resilience in trading volumes and new product offerings.
According to Bedell, Robinhood has been experiencing robust trading momentum, particularly in equities and options. The company’s crypto notional volumes rose over 400% year-over-year, reaching $71 billion in Q4 2024.
The analyst also noted that Robinhood’s newer products, including futures trading, have been gaining traction faster than anticipated. This diversification of offerings could help the company attract and retain users.
Bank of America Securities is also optimistic about Robinhood’s stock. The firm maintains a “Buy” rating with a price objective of $65.00, even higher than Compass Point’s target.
BofA’s analyst highlighted the platform’s higher retail engagement and strong organic growth. The firm believes Robinhood has strong growth potential in both the self-directed retail and cryptocurrency sectors globally.
The analyst expects Robinhood to expand its cryptocurrency offering in the future. This expansion could enhance the platform’s appeal to crypto traders and investors, potentially driving further growth.
The go-to-trading platform for millennials
Investment management company Artisan Partners described Robinhood as “the go-to-trading platform for millennials” in its Q4 2024 investor letter. The firm noted that Robinhood has approximately 25 million accounts, compared to Charles Schwab’s 34 million.
Artisan Partners pointed out that Robinhood’s user base skews younger, with deposits growing faster than the broader industry. This growth is driven by several factors, including the rise of self-directed trading and the generational wealth transfer to millennials.
As Robinhood’s customer base matures and accumulates wealth, Artisan Partners believes the company is well positioned to expand its product offerings. This expansion could help meet the evolving financial needs of its users.
The investment firm also highlighted management’s focus on profitable growth and Robinhood’s 90% fixed cost structure. These factors suggest the potential for meaningful margin expansion as the company continues to scale.
Morgan Stanley has cautioned that stocks in sectors with increased foreign revenue exposure could be more vulnerable to tariff uncertainties. However, this may have less impact on Robinhood due to its focus on the U.S. market.
With the Trump administration implementing its tariff agenda, global markets continue to feel the impact. Morgan Stanley believes that if tariffs remain long-lasting, there is a possibility that defensive stocks might outperform cyclicals.
Dr. David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, anticipates another year of 2% GDP growth for the U.S. economy. He believes that deregulation under the Trump administration could have positive impacts on investing, particularly for financial markets.
Kelly expects that deregulation or lack of additional regulation will help several areas, mainly financial markets. He believes private equity markets and cryptocurrencies are expected to gain the most from deregulation.
This regulatory environment could create additional tailwinds for Robinhood as it continues to expand its crypto offerings and other financial services. The company appears well-positioned to benefit from these trends in the coming year.
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