Robinhood (HOOD) has fallen nearly 12% after some big investors and Wall Street analysts missed out on big gains.
The popular trading platform missed first-quarter profit and revenue expectations on April 28, primarily due to weak crypto trading activity. Although the market punished the stock for failure, Cathie Wood’s Ark Investments saw this as an opportunity and bought around $39.7 million worth of shares the next day, demonstrating confidence in the trading platform’s future. Robinhood remains a key player in Ark’s overall portfolio, accounting for about 3% and ranking among the top holdings in all three funds.
This contrarian move appears to have been made at the same time as Wall Street analysts, saying the failure was just a blip for the company, with data from early April showing improving momentum. They added that stock and options trading volumes are trending toward their strongest levels this year, which could provide an offset to continued weakness in cryptocurrencies.
Cantor Fitzgerald reiterated its “overweight” rating and $110 price target, saying recent activity suggests stabilization. “Preliminary stock and options trading reports for April are trending toward the highest monthly levels of the year,” the company wrote, adding that the missed profits were more related to market conditions than core business issues.
Another company, Compass Point, echoed this view, keeping its investment rating at “buy,” but slightly lowering its price target to $107. The company said the market’s reaction appears to be “negative” given its strong second-quarter forecast.
While both brokers are bullish on Robinhood’s prospects, some analysts warn that there are still risks, especially in crypto trading, which are likely to continue to weigh on performance in the near term amid declining volume and price pressure across the sector.
Investment bank Keefe, Bruyette & Woods (KBW), which had already set its lowest price target, lowered its price target even further, according to FactSet data. Analysts at the company, who rate the stock a “hold,” warned that trading fees continue to decline and could lower their price target from $75 to $65.
“There is a lack of recovery across the board,” analysts at the company said, noting that recovery rates for cryptocurrencies and options continued to decline in the second quarter. This trend has led to downward revisions to long-term forecasts, with KBW lowering its earnings forecast through 2028.
Despite these concerns, one bullish top analyst seems undeterred. Bernstein analysts maintained their Outperform rating and $130 price target, pointing to signs that crypto trading may be stabilizing as stocks and options remain strong, with no further price declines in April.
Additionally, bullish investors are looking beyond trading to new sources of income.
Prediction markets are emerging as an important area, with companies highlighting the growth of event-based contracts and upcoming catalysts such as product launches and global events. Robinhood’s planned prediction market platform, Rothera, is seen as a potential driver of future revenue and profit growth, Kanter said.
For now, the outlook depends on whether the recent increase in trading activity can continue. If that happens, Robinhood could return to growth sooner than expected. Otherwise, pressure on trading revenues could continue into the second half of the year.
The company’s stock rose about 3% on Thursday but is down about 37% this year. Coinbase (COIN), one of the crypto peers that tends to trade in tandem, is up about 3% on the day and is down about 19% year-to-date.
Read more: Why Cantor Fitzgerald thinks Robinhood and Coinbase are the best way to start a prediction market boom
