On Wednesday, Bernstein, a financial firm, increased its price target for Robinhood Markets (NASDAQ:HOOD) to $51, up from $30, while keeping an Outperform rating on the stock. The adjustment comes as Robinhood's share price has seen a significant rise, increasing approximately 170% year-to-date.
The analyst from Bernstein highlighted the potential for further growth, noting that Robinhood has been operating within a regulatory-constrained cryptocurrency environment.
Robinhood's current cryptocurrency offerings are limited compared to competitors, with only around 15 tokens listed, as opposed to over 250 on platforms like Coinbase (NASDAQ:COIN).
Additionally, the company has not generated revenue from staking, lending, derivatives, or stablecoins, which are services provided by other exchanges.
However, with the possibility of a new pro-cryptocurrency U.S. Securities and Exchange Commission (SEC), the analyst anticipates a positive shift that could greatly benefit Robinhood.
Anticipating changes in the regulatory landscape, Bernstein projects that Robinhood could emerge as the primary beneficiary of these crypto regulatory tailwinds. The firm has increased its 2025 earnings estimate for Robinhood's cryptocurrency revenues by 20% compared to previous projections. This estimate now stands at approximately 3.5 times the consensus crypto revenues.
The expected increase in revenue is attributed to market share gains through additional token listings and the introduction of new cryptocurrency product lines to capitalize on a larger revenue opportunity.
The analyst's statement reflects a strong belief in Robinhood's potential to expand its cryptocurrency business significantly under a more favorable regulatory environment.
This growth is expected to be driven by an increase in the number of tokens listed and the launch of new products in the crypto space, positioning Robinhood to tap into a broader revenue stream in the coming years.
In other recent news, Robinhood Markets has made significant strides with its largest acquisition to date, TradePMR, valued at $300 million. This move brings $40 billion in assets under administration (AUA) and over 1,000 Registered Investment Advisors under Robinhood's control. Mizuho (NYSE:MFG), who reaffirmed its Outperform rating for Robinhood, sees this as a significant step enabling the company to penetrate the rapidly expanding RIA market.
In terms of financial performance, Robinhood reported strong Q3 2024 results, with net deposits hitting $10 billion for the third consecutive quarter and customer assets under custody reaching a record $152 billion. The company's Q3 revenues increased by 36% year-over-year to $637 million, and adjusted EBITDA nearly doubled to $268 million.
Analysts have also been adjusting their outlook on Robinhood. Needham upgraded Robinhood shares from Hold to Buy, setting a price target of $40 due to expected expansion of the company's cryptocurrency offerings.
Piper Sandler increased its price target for Robinhood to $36, anticipating a favorable cryptocurrency market trend. Deutsche Bank (ETR:DBKGn) lifted its price target to $35, highlighting the company's ongoing growth efforts, while JMP Securities raised their target to $40 following robust October metrics.
Robinhood also launched new trading products, including Index Options, Futures, and the desktop platform Robinhood Legend, which were met with strong customer demand. Lastly, Robinhood's chief legal and compliance officer, Dan Gallagher, is being considered for the chair of the Securities and Exchange Commission (SEC) in the upcoming administration.
InvestingPro Insights
Robinhood Markets' recent performance aligns with Bernstein's optimistic outlook. According to InvestingPro data, the company has shown impressive growth with a 35.74% increase in revenue over the last twelve months, reaching $2.408 billion. This growth trajectory is further emphasized by the stock's remarkable 333.46% price return over the past year, significantly outperforming the market.
InvestingPro Tips suggest that Robinhood's net income is expected to grow this year, supporting Bernstein's bullish stance. The company's PEG ratio of 0.35 indicates that it may be undervalued relative to its growth prospects, potentially justifying the increased price target.
However, investors should note that Robinhood's stock is trading near its 52-week high, with a price at 97.03% of its peak. This aligns with the InvestingPro Tip that the stock may be in overbought territory based on its RSI.
For those interested in a deeper analysis, InvestingPro offers 13 additional tips for Robinhood Markets, providing a comprehensive view of the company's financial health and market position.
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