Following Robinhood's nearly 12% stock drop due to weaker crypto trading, investors like Cathie Wood's Ark Invest are buying in, signaling confidence in the platform's future. Ark Invest purchased over 500,000 shares, valuing around $39.7 million, after Robinhood's earnings miss on April 28. This move reflects a contrarian view that the earnings disappointment was just a minor setback.
Wall Street analysts, including Cantor Fitzgerald, agree that the miss was largely due to market conditions rather than core business issues and predict stabilization in the company's performance. Early April data indicates improving momentum, with equity and options trading volumes trending towards the highest levels this year, potentially offsetting continued softness in crypto trading. Cantor Fitzgerald maintained its 'Overweight' rating and $110 price target, citing preliminary April equity and option trading volumes as a positive sign.
Other firms, such as Compass Point, also expressed optimism, maintaining a 'Buy' rating despite slightly lowering their price target to $107. However, some analysts, including those from Keefe, Bruyette & Woods, remain cautious, warning of risks in crypto trading and cutting their price target. Despite these concerns, bullish investors are focusing on new revenue streams, particularly prediction markets, which could drive future growth and margin expansion.
The success of Robinhood's planned prediction markets platform, Rothera, is seen as a potential catalyst. The company's outlook depends on whether recent trading activity gains can be sustained, with potential for earlier-than-expected growth if they continue, but pressure on transaction revenue may persist if not.