cryptonews.net
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Cathie Wood continues to accumulate Robinhood stock, signaling confidence in its future growth potential.
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Robinhood's business fundamentals remain strong, with significant growth in customer base, platform assets, and crypto revenue.
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Despite promising growth prospects, Robinhood's high valuation raises concerns, with a forward P/E ratio of 60 and a forward PEG ratio of 2.45.
Cathie Wood, not selling her Robinhood (HOOD) stock, means that she is optimistic about the future growth of the stock. This is despite the recent market volatility that the stock is trying to overcome. Although the price of Robinhood has declined, from a high of 153.60 to 122 as of press time, Wood has amassed a greater share in the company.
Cathie Wood, the founder of Ark Invest, has been buying Robinhood stock at lower prices, which implies that she is not so sure that the stock will recover. Last week, it was reported in filings that Wood had purchased over $30 million worth of Robinhood shares. Through its numerous funds, Ark Invest has large shares in the stock. The Ark Innovation ETF (ARKK) has more than $247 million in shares of Robinhood, the Ark Next Generation Internet ETF (ARKW) has $109 million, and the Ark Blockchain and Fintech Innovation ETF (ARKF) has $60 million in shares of HOOD. Wood was acting in line with an optimistic perception of Wall Street analysts who are predicting a possible recovery.
According to MarketBeat, a consensus forecast of Robinhood is $137, approximately 12% above the stock price. The most optimistic is Barclays Benjamin Budish, who projects a price of $171, or 43% upside, and Loop Capital and Morgan Stanley are at $152 and $147, respectively. This general understanding indicates high confidence in the company as it is on its way, in spite of the recent declines.
Robinhood’s Business Growth and Market Diversification
The stock price fall of Robinhood has not been accompanied by a reduction of its underlying business fundamentals. Despite the rising competition in the industry with other platforms such as SoFi and WeBull, the company is expanding in various segments. The number of customers that Robinhood finances grew by 26.8 million in the third quarter, compared to 24 million during the same period last year. The assets in the form of platforms of the company also increased sharply, from $15 billion to $333 billion by the end of the third quarter of 2024. This tremendous growth amounted to a revenue growth of more than 100 % making it to $1.27 billion. Interestingly, the revenue of Robinhood in the crypto industry has increased threefold in this timespan, which indicates the growing need for crypto services.
Wall Street analysts are still optimistic that Robinhood will continue to grow. It is estimated that the annual revenue of the company can grow by 53.9% annually to $4.52 billion. Analysts project that it will increase its quarterly revenue by 31% to $1.33 billion. Robinhood is going global as well, having already acquired in Indonesia, the country with millions of prospective traders, and new service lines, including tokenized assets and a prediction market.
Nevertheless, even with these encouraging growth opportunities, Robinhood's valuation can be considered a major issue. The company is now valued at a forward price-to-earnings (P/E) ratio of 60, which is far greater than the industry averages of 12.60 and its 5-year average of 36. The forward PEG ratio of 2.45 also indicates that the stock is possibly overvalued in terms of the possible growth in its earnings.
Technical Analysis refers to the possibility of a Rebound
The Robinhood stock depicts great prospects for a recovery. The stock has soared to its present value of $120 after falling to its lowest point of $29.85 in April. Its 100-day and 200-day Exponential Moving Averages (EMAs) have just crossed the stock, indicating a positive movement. A head-and-shoulders chart pattern has been inverted, which is considered to be a positive change of direction indicator. The high of this pattern is at $100, the left shoulder at $120, and the stock is in the process of testing the right shoulder.
Source: TradingView
In case the stock keeps trading this way based on the bullish trend, the first price target will be $153, which is a 25 % rise from its present price. But this optimistic view will be nullified when the stock falls below $114, as this will guideline on the possible bearish line.
The fact that Cathie Wood still bought Robinhood stock, and the business of the company developed considerably, indicates that the future performance of the company can be assumed to be optimistic. The robust customer acquisition, the growing crypto-revenue, and the internationalization of Robinhood are the major reasons behind the optimistic forecast. Nonetheless, its valuation and risks that may be involved in its forward P/E and PEG ratios are something to be careful about. Nevertheless, though the technical data indicates a favourable direction, the investor ought to take note of the overpricing of the stock and the market risks.