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The Zacks Analyst Blog Highlights Robinhood Markets, Charles Schwab and Coinbase Global
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For Immediate Release
Chicago, IL – September 3, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Robinhood Markets, Inc. (HOOD - Free Report) , Charles Schwab (SCHW - Free Report) and Coinbase Global, Inc. (COIN - Free Report) .
Here are highlights from Friday’s Analyst Blog:
Should You Buy Robinhood (HOOD - Free Report) Up +85% in a Year?
Robinhood Markets, Inc. has had an impressive run, with the stock skyrocketing 85.2% in a year.
This impressive run on the bourses has significantly outpaced the 27.9% rise of the industry it belongs to and the 23.7% growth of the Zacks S&P 500 composite. Moreover, the stock is trading well above its close peer, Charles Schwab, in the same time frame.
Given the continuous strength of Robinhood shares, many investors might be tempted to buy the stock. But is now the right time to invest in HOOD? It is essential to delve into the details and analyze various factors before answering this.
HOOD's Expansion Plans: Venturing Beyond Trading
Robinhood became extremely popular among younger generations riding on the meme stock wave in early 2021. Nonetheless, since its IPO in July 2021, a lot has happened on the company front.
Robinhood has evolved from a brokerage firm mainly trading in digital assets to a more mature and diversified entity as it expanded into retirement and credit card accounts. Looking at the numbers, in 2021, HOOD majorly depended on transaction-based revenues (almost 75% of total revenues) to generate income. In 2023, this came down to 42% of total revenues.
In July 2024, Robinhood acquired Pluto Capital Inc., an innovative AI-powered investment research platform. This marked a significant step as the company aims to enhance its offerings with intelligent, data-driven investing tools. With the integration of Pluto's advanced capabilities, the company is set to revolutionize the investment experience for its users.
This is part of HOOD's broader strategy to expand its global and domestic footprint and become a comprehensive financial services provider. In sync with this, the company announced plans to acquire Bitstamp, the global cryptocurrency exchange, for approximately $200 million in June 2024. The move underscores the company's commitment to diversifying its product offerings beyond traditional transaction-related revenues.
With this impending acquisition, Robinhood positions itself to compete directly with major crypto exchanges like Binance and Coinbase Global, Inc.. Bitstamp's core spot exchange, which features more than 85 tradable assets, coupled with its popularity in Europe and Asia, will significantly enhance Robinhood's crypto offerings.
The company also launched its trading app in the U.K. this March. HOOD is also contemplating offering cryptocurrency futures in the United States and Europe soon.
Further, it plans to launch CME-based futures in the United States for Bitcoin and Ether. Since the approval of U.S. Bitcoin exchange-traded funds (ETFs) in January, the demand for futures has risen. Robinhood intends to capitalize on this to diversify revenues.
Initiatives to change the revenue mix and not depend exclusively on volatile transaction-based revenues give HOOD solid leverage.
HOOD Rewards Shareholders
In May, Robinhood announced a share buyback plan. The company's board of directors approved a share repurchase program, authorizing it to repurchase up to $1 billion of its outstanding common stock.
While the plan doesn't have an expiration date, the company expects to buy back shares in two to three years, starting from the third quarter of 2024.
Robinhood is on solid ground, with ample cash reserves. As of June 30, 2024, it reported cash and cash equivalents of $4.5 billion.
Robinhood Faces Regulatory Issues
Robinhood's push into the global crypto market comes amid ongoing regulatory challenges in the United States. In May 2024, the company received a Wells notice from the U.S. Securities and Exchange Commission ("SEC") concerning the tokens traded on its platform, reflecting the complex regulatory landscape for crypto firms.
The notice came because of the alleged violation of registrations as a securities broker and transfer agent. Dan Gallagher, Robinhood's chief legal, compliance and corporate affairs office, said, "We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law."
Likewise, the SEC filed a lawsuit against Coinbase in June 2023 on the allegations of operating an unregistered exchange by allowing the sale of certain crypto tokens the agency considers as investment securities and, hence, part of the SEC's jurisdiction.
HOOD Stock has Further Room to Run
Analysts seem bullish about Robinhood's prospects. Over the past month, the Zacks Consensus Estimate for 2024 and 2025 earnings has moved upward.
This upward adjustment reflects a positive sentiment among analysts and suggests encouraging prospects.
Despite the massive rally, HOOD stock is still undervalued. Currently, the stock is trading at 2.65X 12-month trailing Price/Tangible Book (P/TB), below the industry's P/TB TTM multiple of 4.99X. Also, the stock is trading well below SCHW, which is trading at 8.04X 12-month trailing P/TB TTM.
Hence, from a valuation perspective, Robinhood shares present an attractive buying opportunity as the market is yet to fully recognize or price the company's growth prospects.
A thorough analysis shows that Robinhood is on the right path to expand/diversify operations. With the stock market rally likely to continue because of several favorable macroeconomic developments, the company will keep benefiting from the rising trading volume.
HOOD's initiatives to keep adding new products and services and plans to become a global entity by venturing across Europe and Asia Pacific regions, organically and through buyouts, align with its expansion efforts. The company is well-poised to ride the growth trajectory.
The positive sentiments of analysts are echoed in the upward estimate revision trends and compelling valuation. All these factors indicate that betting on this Zacks Rank #1 (Strong Buy) stock will be a wise investment move. You can see the complete list of today's Zacks #1 Rank stocks here.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights Robinhood Markets, Charles Schwab and Coinbase Global
For Immediate Release
Chicago, IL – September 3, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Robinhood Markets, Inc. (HOOD - Free Report) , Charles Schwab (SCHW - Free Report) and Coinbase Global, Inc. (COIN - Free Report) .
Here are highlights from Friday’s Analyst Blog:
Should You Buy Robinhood (HOOD - Free Report) Up +85% in a Year?
Robinhood Markets, Inc. has had an impressive run, with the stock skyrocketing 85.2% in a year.
This impressive run on the bourses has significantly outpaced the 27.9% rise of the industry it belongs to and the 23.7% growth of the Zacks S&P 500 composite. Moreover, the stock is trading well above its close peer, Charles Schwab, in the same time frame.
Given the continuous strength of Robinhood shares, many investors might be tempted to buy the stock. But is now the right time to invest in HOOD? It is essential to delve into the details and analyze various factors before answering this.
HOOD's Expansion Plans: Venturing Beyond Trading
Robinhood became extremely popular among younger generations riding on the meme stock wave in early 2021. Nonetheless, since its IPO in July 2021, a lot has happened on the company front.
Robinhood has evolved from a brokerage firm mainly trading in digital assets to a more mature and diversified entity as it expanded into retirement and credit card accounts. Looking at the numbers, in 2021, HOOD majorly depended on transaction-based revenues (almost 75% of total revenues) to generate income. In 2023, this came down to 42% of total revenues.
In July 2024, Robinhood acquired Pluto Capital Inc., an innovative AI-powered investment research platform. This marked a significant step as the company aims to enhance its offerings with intelligent, data-driven investing tools. With the integration of Pluto's advanced capabilities, the company is set to revolutionize the investment experience for its users.
This is part of HOOD's broader strategy to expand its global and domestic footprint and become a comprehensive financial services provider. In sync with this, the company announced plans to acquire Bitstamp, the global cryptocurrency exchange, for approximately $200 million in June 2024. The move underscores the company's commitment to diversifying its product offerings beyond traditional transaction-related revenues.
With this impending acquisition, Robinhood positions itself to compete directly with major crypto exchanges like Binance and Coinbase Global, Inc.. Bitstamp's core spot exchange, which features more than 85 tradable assets, coupled with its popularity in Europe and Asia, will significantly enhance Robinhood's crypto offerings.
The company also launched its trading app in the U.K. this March. HOOD is also contemplating offering cryptocurrency futures in the United States and Europe soon.
Further, it plans to launch CME-based futures in the United States for Bitcoin and Ether. Since the approval of U.S. Bitcoin exchange-traded funds (ETFs) in January, the demand for futures has risen. Robinhood intends to capitalize on this to diversify revenues.
Initiatives to change the revenue mix and not depend exclusively on volatile transaction-based revenues give HOOD solid leverage.
HOOD Rewards Shareholders
In May, Robinhood announced a share buyback plan. The company's board of directors approved a share repurchase program, authorizing it to repurchase up to $1 billion of its outstanding common stock.
While the plan doesn't have an expiration date, the company expects to buy back shares in two to three years, starting from the third quarter of 2024.
Robinhood is on solid ground, with ample cash reserves. As of June 30, 2024, it reported cash and cash equivalents of $4.5 billion.
Robinhood Faces Regulatory Issues
Robinhood's push into the global crypto market comes amid ongoing regulatory challenges in the United States. In May 2024, the company received a Wells notice from the U.S. Securities and Exchange Commission ("SEC") concerning the tokens traded on its platform, reflecting the complex regulatory landscape for crypto firms.
The notice came because of the alleged violation of registrations as a securities broker and transfer agent. Dan Gallagher, Robinhood's chief legal, compliance and corporate affairs office, said, "We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law."
Likewise, the SEC filed a lawsuit against Coinbase in June 2023 on the allegations of operating an unregistered exchange by allowing the sale of certain crypto tokens the agency considers as investment securities and, hence, part of the SEC's jurisdiction.
HOOD Stock has Further Room to Run
Analysts seem bullish about Robinhood's prospects. Over the past month, the Zacks Consensus Estimate for 2024 and 2025 earnings has moved upward.
This upward adjustment reflects a positive sentiment among analysts and suggests encouraging prospects.
Despite the massive rally, HOOD stock is still undervalued. Currently, the stock is trading at 2.65X 12-month trailing Price/Tangible Book (P/TB), below the industry's P/TB TTM multiple of 4.99X. Also, the stock is trading well below SCHW, which is trading at 8.04X 12-month trailing P/TB TTM.
Hence, from a valuation perspective, Robinhood shares present an attractive buying opportunity as the market is yet to fully recognize or price the company's growth prospects.
A thorough analysis shows that Robinhood is on the right path to expand/diversify operations. With the stock market rally likely to continue because of several favorable macroeconomic developments, the company will keep benefiting from the rising trading volume.
HOOD's initiatives to keep adding new products and services and plans to become a global entity by venturing across Europe and Asia Pacific regions, organically and through buyouts, align with its expansion efforts. The company is well-poised to ride the growth trajectory.
The positive sentiments of analysts are echoed in the upward estimate revision trends and compelling valuation. All these factors indicate that betting on this Zacks Rank #1 (Strong Buy) stock will be a wise investment move. You can see the complete list of today's Zacks #1 Rank stocks here.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.