Robinhood and Interactive Brokers: Are They Overvalued or Still Worth Investing In?

Goldman Sachs believes Robinhood and Interactive Brokers have room to rally despite high valuations. Robinhood trades at 65 times forward earnings, while Interactive Brokers trades at 31 times, compared to the average of 17 times for the Financial Select Sector SPDR. Despite sharply higher valuations, Goldman sees potential for growth in these stocks.

Goldman Sachs analysts have expressed optimism about the potential for growth in Robinhood and Interactive Brokers, despite their sharply higher valuations. The two companies, which have been trading at 65 times forward earnings and 31 times, respectively, according to FactSet, are currently valued at multiples significantly higher than the average of 17 times for the Financial Select Sector SPDR [1].

Robinhood Markets (HOOD) has seen its stock price soar 405.4% in the past year, driven by strong financial results, aggressive expansion into new products and markets, and favorable operating conditions. The company has evolved from a retail brokerage to a diversified financial services platform, expanding into wealth management, advisory services, and consumer finance. Its recent acquisitions, including WonderFi Technologies Inc. and Bitstamp, have positioned it to tap into high-growth crypto and fintech markets [2].

Interactive Brokers (IBKR) has also been expanding its offerings, including the introduction of event contracts and prediction markets in Canada. The company's focus on technological innovation and global expansion is expected to drive growth, despite its higher valuation compared to the industry average [3].

While both companies face regulatory scrutiny and increased competition, their strategic moves and growing user bases suggest potential for future growth. Goldman Sachs' bullish outlook is reflected in the upward revision of the Zacks Consensus Estimate for HOOD's earnings, which implies year-over-year growth of 42.2% and 20.8% in 2025 and 2026, respectively [2].

Despite the high valuations, the analysts at Goldman Sachs believe that Robinhood and Interactive Brokers have the potential to rally due to their strong fundamentals and innovative strategies. Investors should closely monitor these companies' progress and regulatory developments as they continue to expand their services and markets.

References:
[1] https://finance.yahoo.com/m/7cc3c94b-ca42-3d05-82ea-1616f80150c9/robinhood-and-interactive.html
[2] https://finance.yahoo.com/news/robinhood-soars-405-sustainable-momentum-135100160.html
[3] https://www.ainvest.com/news/robinhood-expands-ai-investing-services-impact-hood-investors-examined-2508/