Barclays Upgrades Robinhood, Schwab on Growth Opportunities

Barclays has recently upgraded both Robinhood Markets Inc. (HOOD) and Charles Schwab Corp. (SCHW) to 'overweight' from 'equal-weight,' citing a 'constructive' trading backdrop for 2025. The analyst, Benjamin Budish, sees 'healthy earnings growth opportunities' across his coverage, with a focus on improved prospects for both companies.



For Robinhood, Budish is increasingly confident in the company's long-term roadmap, which includes unique opportunities in product and geographic expansion. He predicts business growth in futures trading, banking, and credit-card services, as well as crypto trading. Robinhood's ability to compete on price and attract larger flows on both the retail and institutional sides creates a robust revenue model, positioning the company for substantial growth.



As for Schwab, Budish anticipates easy medium-term earnings-per-share growth as cash sorting out of its accounts eases due to lower interest rates. This trend will, in turn, improve its net interest income and net interest margin over the next few years. Additionally, the headwind of former Ameritrade customers leaving due to the merger deal is expected to subside, further boosting Schwab's prospects.



Prior to the upgrades, Robinhood's stock was up 227% in 2024, compared to a 32.3% rise by the Nasdaq COMP. Schwab's stock is up by 18.4% this year. Both companies are well-positioned to capitalize on a constructive macro backdrop, with Barclays noting that the brokerage sector is expected to benefit broadly from stable equity markets and higher interest rates.

In conclusion, Barclays' upgrades of Robinhood and Schwab reflect the analysts' optimism about the growth opportunities for both companies in the coming years. As the market backdrop remains constructive, investors should consider these upgrades when evaluating their portfolios.