Robinhood stock price surged to a record high this month as its earnings showed that its business was doing well.
- Robinhood share price has jumped to a record high this year.
- The company’s crypto revenue more than doubled.
- The stock faces substantial valuation risks.
HOOD soared to a high of $113.38, bringing its year-to-date gains to 180% and its market capitalization to nearly $100 billion.
Robinhood stock has catalysts
The most recent results showed that Robinhood’s business is thriving as more customers join. It ended the second quarter with over 26.5 million funded customers, up from 24.2 million in the same period last year.
More customers are subscribing to its Gold package, with the number of customers hitting 3.48 million. The total assets in its platform jumped to $279 billion.
Most importantly, Robinhood has become a major player in the crypto industry, a trend that will continue after the Bitstamp acquisition. Its crypto transaction revenue jumped to $160 million, a 98% jump from Q2’24.
Robinhood is focusing on innovation to boost its revenue and profits. For example, it is now offering tokenized stocks in Europe, and is working on a Layer-2 network platform using Arbitrum (ARB) technology.
Robinhood has also become a Polymarket rival by launching a predictions market. It is also working to boost its margins by lowering costs.
As a result, analysts are optimistic that the company’s growth will accelerate this year. The average estimate among analysts is that its annual revenue will hit $3.99 billion, up by 35% from last year. It will then hit $4.7 billion in the next financial results.
However, Robinhood stock has a major risk that may affect its future performance: its valuation. According to SeekingAlpha, it has a forward price-to-earnings of 60, much higher than the financial sector median of 10.6.
Its forward PEG ratio, a unique P/E multiple that incorporates its growth, is 0.11, much higher than the sector median of 0.57. Therefore, these numbers mean that the stock is priced to perfection and that a pullback may be possible.
HOOD stock price has technical risks
The daily chart shows that the HOOD stock price has been in a strong bull run this year and is now sitting at its all-time high.
This chart shows that the stock has two major risks. First, oscillators like the MACD and the Relative Strength Index have formed a bearish divergence pattern. A divergence happens when these indicators are falling as the price rises.
Second, the stock price is much higher than the 50-day and 100-day Exponential Moving Averages. The risk is that it may suffer a mean reversion, where an asset drops and moves back to its historical averages as investors book profits.