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Investors are bailing on Robinhood Markets (HOOD) after the retail trading platform came in shy of both profit and revenue estimates in its first financial quarter (Q1).
HOOD attributed the quarterly weakness to its crypto segment; fees from digital assets tanked 47% on a year-over-year basis due to softness in the broader cryptocurrency market.
This renewed concerns that Robinhood may not be able to sustain the explosive growth it recorded last year, subsequently driving its share price below major moving averages (MAs).
Despite the technical breakdown, however, Bernstein’s senior analyst Gautam Chhugani remains bullish on Robinhood stock that’s now down nearly 40% versus its year-to-date high.
Why Is Bernstein Still Bullish on Robinhood Stock?
Chhugani recommends buying HOOD shares on the post-earnings dip for two main reasons: much of the downside is already baked in, and several operating indicators signal a near-term recovery.
The firm’s prediction markets segment, for example, had a stellar quarter, with other transaction revenue more than quadrupling to $147 million.
Robinhood’s margin book also now sits at a record $17 billion, indicating increased activity from wealthier clients.
More importantly, Q1 may have been the trough given trading data showed signs of improvement in April, the Bernstein analyst told clients in a post-earnings research note.
2 Major Catalysts That May Drive HOOD Shares Higher
Bernstein is also constructive on HOOD’s upcoming launch of “Rothera,” an in-house prediction market exchange built in partnership with Susquehanna.
According to analyst Gautam Chhugani, the firm’s role as the sole initial trustee for the Trump Accounts may also accelerate top-line growth as the year unfolds.
His “Outperform” rating on Robinhood shares comes with a $130 price target, indicating potential upside of roughly 85% from current levels.
Note that Robinhood Markets has a history of closing May with over 16% gain on average – a seasonal pattern that makes it even more attractive to own in the near term.
Wall Street Remains Bullish on Robinhood Markets
Other Wall Street analysts also agree with Chhugani’s bullish view on Robinhood due to its toned-down valuation and aggressive international expansion, with funded accounts already approaching 1 million.
The consensus rating on HOOD stock sits at “Moderate Buy” currently, with the mean price target of about $105 indicating potential for a 50% rally from here.
