Analysts revamp Robinhood stock price target after earnings

Here's what could happen to Robinhood shares next.

Feb 15, 2024 - 08:30

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Analysts revamp Robinhood stock price target after earnings

It seems like such a long time ago.

Return with us now to those thrilling days of yesteryear--also known as early 2021--when so-called "meme stocks" roamed the earth.

These were stocks whose retail trading activities were heavily influenced by social media. They became a very hot item, driven largely by online forums such as the r/WallStreetBets subreddit.

Users on these forums encouraged others to buy and hold heavily shorted stocks, with video game retailer GameStop (GME) emerging as the most popular among this class.

GameStop's meteoric rise was fueled by a massive short squeeze in early 2021, and the story became the subject of last year's "Dumb Money."

Retail investors pushed GameStop’s price from under $3 to as high as $483 in late January of that year, causing the hedge funds that had bet against it to lose billions of dollars.

Analysts react to Robinhood earnings report
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Retail investor 'Watching the rich cry'

“I did some research and immediately knew that I wanted to put my money in, make big gains, and watch the rich cry into their $5,000 suits," one retail investor told The Guardian.

Retail investors also rallied around companies such as AMC Entertainment (AMC) , Blackberry, and Bed, Bath & Beyond, which filed for bankruptcy last year.

Robinhood Markets (HOOD) caught all kinds of hell and condemnation when the financial services company froze trades for GameStop, citing issues with volatile stock and regulatory requirements.

Investors alleged that Citadel Securities, Robinhood’s biggest market maker partner, directed the brokerage app to freeze trades- something both companies denied.

Citadel CEO Kenneth Griffin and Robinhood CEO Vlad Tenev faced questioning from the House Financial Services Committee.

“I first learned of Robinhood’s trading restrictions only after they were publicly announced,” Griffin said in prepared testimony, according to CNN. “All of us at Citadel Securities are committed to the healthy functioning of the U.S. equities markets.”

A group of investors sued Robinhood and last year a U.S. federal appeals court has upheld a decision to dismiss an investor class-action lawsuit.

Meanwhile, Citadel Securities agreed in September to a $7 million fine with the SEC over alleged order placement errors and misrepresentation of short sales.

CEO: 'I love the momentum'

Yes, it was quite a time.

And it brings us to Feb. 13 of this year--also known as Tuesday--when Robinhood beat Wall Street's fourth-quarter earnings expectations.

The company earned 13 cents a share on sales of $471 million, beating the FactSet consensus of a loss of 1 cent on sales of $454.7 million.

A year ago, Robinhood reported a loss of 19 cents a share on $380 million in revenue.

The company said that transaction-based revenue increased 8% year-over-year to $200 million, primarily driven by cryptocurrencies revenue of $43 million, up 10%, and equities revenue of $25 million, which increased 19%.

This was partially offset by options revenue of $121 million, down 2%.

"We've been taking trading market share for some time, and now we're winning net asset inflows from every one of our major competitors, averaging over $100,000 per transfer," Tenev said during the company's call with analysts.

"And as for funded customers, we've already grown more in the first half of Q1 than we did in each of the last eight quarters," he added, according to a transcript of the call. "So, I love the momentum we're building, and I'm excited about 2024,"

Investors also seemed to agree about the momentum, as Robinhood shares finished up 13% on Feb. 14 to $13.38.

Analyst: story 'seems to be improving'

Analysts also found things to like in the results, for the most part, and several firms raised their share price targets.

Citigroup analyst Christopher Allen raised his RobinHood price target to $13 from $12.50 and kept a neutral rating on the shares.

More Wall Street Analysts:

The company reported a solid quarter as it saw healthy net deposits and continued growth of its gold customer base, Allen said.

The analyst noted that Robinhood continues to progress on several growth opportunities and remains focused on core expense growth.

"While aspects of the story seemed to be improving, we prefer to wait on the sidelines," Allen cited as the reason for maintaining a neutral rating.

JMP Securities raised its price target on Robinhood to $25 from $23 and kept its outperform rating on the shares. The firm noted that Robinhood delivered a strong finish to 2023 with positive outlook commentary for 2024.

The expense guidance highlights Robinhood's discipline and operational leverage with big levers still to pull, the firm said

Deutsche Bank analyst Brian Bedell raised his price target on Robin Hood to $12 from $11 and kept a hold rating on the shares.

In a research note, he said Robinhood reported a good fourth quarter, though its revenue from growth initiatives is still uncertain.