Following Robinhood's nearly 12% stock drop after missing its first-quarter earnings and revenue targets, primarily due to weaker crypto trading, some major investors and Wall Street analysts remain optimistic. On the day after the earnings announcement, Cathie Wood's Ark Invest purchased approximately $39.7 million worth of Robinhood shares, signaling confidence in the platform's future prospects. This move reflects Ark's continued support, with Robinhood comprising about 3% of its portfolios and ranking among the top holdings. This contrarian stance aligns with Wall Street analysts who view the earnings miss as a minor setback.
Early April data indicates improving momentum, with equity and options trading volumes trending toward the highest levels this year. This could potentially counterbalance the ongoing softness in crypto trading. Cantor Fitzgerald reaffirmed its 'Overweight' rating and $110 price target, citing stabilization in recent activity. The firm noted that preliminary April equity and option trading volumes are on track to reach the highest monthly level this year, attributing the earnings miss to market conditions rather than core business issues.
Compass Point also shared this view, maintaining a 'Buy' rating while slightly adjusting its price target to $107. The firm believes the market reaction is focused on past performance, despite expectations of a stronger second quarter. While some brokers are bullish about Robinhood's outlook, others have expressed caution, particularly regarding crypto trading, which is likely to continue affecting results in the near term due to lower volumes and pricing pressure. Keefe, Bruyette & Woods (KBW) lowered its price target to $65 from $75, citing declining transaction fees that could persist.
The firm's analysts, who rate the stock a 'Hold,' warned of falling capture rates across the board, leading to lower long-term forecasts through 2028. However, Bernstein's analysts, who maintained their 'Outperform' rating and $130 price target, pointed to signs of stabilizing crypto activity, as April has not seen further price declines, while equities and options remain strong.
Beyond trading, investors are now focusing on new revenue streams, particularly prediction markets, which are expected to drive future growth and margin expansion. Robinhood's planned prediction markets platform, Rothera, is seen as a potential catalyst for this growth. The outlook depends on whether recent gains in trading activity can continue. If they do, Robinhood may return to growth sooner than expected.
If not, pressure on transaction revenue could persist into the second half of the year. The stock rose about 3% on Thursday but has fallen approximately 37% this year.
Meanwhile, Coinbase, one of its crypto peers, rose about 3% on the day and is down around 19% year-to-date.