Following Robinhood's nearly 12% stock drop after missing its first-quarter earnings and revenue estimates, primarily due to weaker crypto trading, some major investors and Wall Street analysts remain optimistic about its future. Cathie Wood's Ark Invest bought approximately $39.7 million worth of Robinhood shares, signaling confidence in the platform, which remains a significant position across Ark's portfolios, making up about 3% of its holdings. This move coincided with Wall Street analysts downplaying the earnings miss as a minor setback, citing early April data that suggests improving momentum, with equity and options trading volumes trending towards the highest levels this year, potentially counterbalancing the continued softness in crypto.
Cantor Fitzgerald reiterated its 'Overweight' rating and $110 price target, stating that recent activity indicates stabilization, with preliminary April equity and option trading volumes expected to reach the highest monthly level this year, attributing the earnings miss to market conditions rather than core business issues. Compass Point also maintained its 'Buy' rating, albeit with a slightly lower price target of $107, arguing that the market reaction seems 'backwards looking' given expectations of a stronger second quarter.
However, some analysts cautioned about ongoing risks, particularly in crypto trading, which may continue to impact results in the near term due to lower volumes and pricing pressure across the sector. Keefe, Bruyette & Woods (KBW) cut its price target to $65 from $75, warning that declining transaction fees could persist, and trimmed its earnings estimates through 2028 due to falling capture rates across the board.
In contrast, Bernstein's analysts maintained their 'Outperform' rating and $130 price target, pointing to signs that crypto activity may be stabilizing, with April showing no further price declines, and equities and options remaining strong. Beyond trading, investors are now focusing on new revenue streams, with prediction markets emerging as a key area, driven by growth in event-based contracts and upcoming catalysts such as product launches and global events. Robinhood's planned prediction markets platform, Rothera, is seen as a potential driver of future revenue and margin expansion, according to Cantor.
The outlook depends on whether recent trading activity gains can be sustained; if so, Robinhood may return to growth sooner than expected, but 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 around 37% this year, while its crypto peer Coinbase is down about 19% year-to-date.