In-depth analysis uncovers the secrets behind market moves.

Robinhood Shares "No Room to Grow" After 75% Soar This Year, Analyst Warns, Citing Valuation and Competition Headwinds

Wallstreet InsightTuesday, Feb 18, 2025 8:01 am ET

1min read

Wolfe Research downgraded Robinhood Markets to "Peer Perform" from "Outperform" on Monday, citing valuation concerns and competitive risks from traditional financial institutions.

Analyst Steven Chuback noted that the bullish drivers supporting their previous upgrade in June 2024 have largely played out, with significant upward revisions to earnings per share (EPS) estimates and crypto-related tailwinds now well understood by investors.

"While we continue to see a credible path to $2+ EPS by 2026, with shares trading at ~30x that figure, consistent with other growth financials, upside appears fully baked," the analysts wrote.

Robinhood's shares have soared 75% this year, following a near 200% return in 2024.

The retail-centered investing platform posted earnings last week, with revenue of $1.01 billion and a net income of $916 million, or $1.01 per share, marking annual revenue of $3 billion. For 2025, the company expects another "double-digit" revenue growth, with no specific earnings guidance.

Robinhood saw a surge in trading activity following President Donald Trump's victory in November, as investors anticipated a more favorable regulatory stance toward cryptocurrencies, along with corporate deregulation that boosted equities. Trump has expressed support for greater crypto adoption and clearer regulatory frameworks, which could open up new revenue streams for Robinhood, including additional alt-coins, staking, lending, and stablecoins.

However, Chuback flagged increasing competitive risks to Robinhood from major online brokerages like Fidelity and Charles Schwab. "HOOD has managed to raise crypto pricing by more than 2x since our June upgrade, and its pricing remains highly competitive compared to other crypto platforms," Chuback wrote. "Once we have improved regulatory clarity, we could see that advantage get competed away, with the potential risk that Fidelity/Schwab launch similar spot crypto trading platforms at more competitive price points."

With shares currently trading at around 30 times the analyst's earnings per share forecast, "risk-reward appears much more balanced," Chuback said.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.