Why Robinhood's Arrow Points Higher Today
Robinhood Markets (NASDAQ: HOOD) stock shot higher Friday afternoon after BofA Securities analyst Craig Siegenthaler double-upgraded the stock from "underperform" to "buy" and added another $10 to his previous $14 price target.
As of 12:30 p.m. ET, Robinhood stock is up 12%.
What Bank of America says about Robinhood stock
Bank of America initiated coverage of Robinhood stock shortly after its 2021 initial public offering (IPO), at a time when retail engagement was peaking -- and about to fall. Business hit a nadir in 2023, but since then, Siegenthaler says Robinhood has enjoyed a remarkable turnaround, with growth accelerating, user engagement increasing, costs being cut, and operating leverage taking hold.
As I wrote last week, Robinhood's first-quarter earnings results were simply tremendous, featuring a 40% surge in revenue and $127 million in profits. Nor was this a fluke. In fact, S&P Global Market Intelligence reports that Robinhood has reported positive net income in three of its last four reported quarters and positive free cash flow in two of those quarters.
Is Robinhood stock a buy?
Admittedly, trailing-12-month results still show Robinhood with negative free cash flow. And $127 million in profit is not a lot for a company valued at $15.7 billion, resulting in a trailing price-to-earnings (P/E) ratio of 124. But analysts are forecasting Robinhood will end this year with as much as $463 million in net income, lowering its current-year P/E to a much more palatable 34.
Suffice it to say that 34 times earnings for a stock growing its business at 40% would actually be a very nice price to pay for Robinhood. While the stock's not guaranteed to hit the targets Wall Street has set for it, Robinhood is on the right track and growing nicely.
Bank of America is right: Robinhood stock might finally be a buy.
Should you invest $1,000 in Robinhood Markets right now?
Before you buy stock in Robinhood Markets, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Robinhood Markets wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $578,143!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of May 13, 2024
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.
