Robinhood Markets gapped up Thursday and is on track for a new closing high as shares top a new buy point. It is the IBD Stock of the Day.
Robinhood stock has tripled in value so far this year, and its latest chart action suggests more gains are likely. The company has become one of the largest online brokerages, with a market cap of nearly $100 billion.
Menlo Park, Calif.-based Robinhood has a 99 IBD Composite Rating, the highest possible. Its Relative Strength Rating also is a perfect 99. The company's fundamentals are superb, too.
Sales growth ranged from 36% to 115% the past four quarters. After posting losses in 2021-2023, the company swung to a profit of $1.09 a share last year, according to IBD MarketSurge. Analysts expect earnings to climb 8% this year to $1.69 a share, according to FactSet.
On July 30, second-quarter results beat Wall Street expectations, although cryptocurrency revenue missed estimates.
Robinhood's Innovation
Robinhood — which helped popularize commission-free trading — is again innovating in the industry. Last month, it launched tokenized stock trading, a way to trade in U.S. stocks and ETFs through cryptocurrency. The new Robinhood Stock Tokens are blockchain-based derivatives that give exposure to the U.S. market initially for European clients.
"Our latest offerings lay the groundwork for crypto to become the backbone of the global financial system," Chairman and CEO Vlad Tenev said in the official announcement.
Curt Hopkins, founder of Consilium Ventures, a venture-capital firm partly focused on fintech, and CEO of MCQMarkets, said crypto firms have a new architecture that can change how securities are settled and managed.
"Some are proposing replacing exchanges and broker-dealers with onchain infrastructure …," Hopkins said in a written reply. "Given Robinhood's history of innovation, I have no doubt that they will introduce new, game-changing investment products as soon as they receive exemptive relief from the SEC."
Several analysts raised their price targets on Robinhood stock following the latest earnings report.
Mizuho raised its price target to 120 from 99 and kept an outperform rating. Analyst Dan Dolev cited accelerating growth year over year in funded accounts, TheFly.com reported. The analysts called Robinhood's focus on asset tokenization "particularly interesting."
The company, which has 26.5 million customers, told analysts after the July 30 earnings report that it hopes to someday process all its customers' financial transactions, and that may include consumer loans. Robinhood already offers mortgages via a partnership with Sage Home Loans.
Robinhood Stock Analysis
The brokerage went public in July 2021 at 38 a share and raced as high as 85 a few weeks after the IPO. Robinhood stock has emerged from a depressed period that saw shares lose as much as 92% to its all-time low of 6.81 in June 2022. Since late 2023, shares have been fighting their way back and making new highs.
Robinhood stock jumped more than 5% Thursday, clearing a trendline that offered a buy point around 107. The relative strength line is almost at a new high, acting as a confirming signal for the stock's advance. Shares had pulled back near the 10-week moving average and bounced back.
Robinhood stock has a 21-day average true range (ATR) of 5.10%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
