Robinhood’s (HOOD) nearly 12% decline since its big earnings miss has been written off by some major investors and Wall Street analysts.
The popular trading platform missed its first-quarter profit and revenue estimates on April 28, mainly due to weak crypto trading activity. The market punished the stock, but Cathie Wood’s Ark Invest saw this as an opportunity and purchased approximately $39.7 million worth of shares the next day, a sign of confidence in the trading platform’s future. Robinhood remains a significant position in Ark’s portfolios, accounting for approximately 3% and ranking among the top holdings of all three funds.
The contrarian move appears to have come at the same time as Wall Street analysts agreed the failure was just a blip for the company, and data from early April indicates improving momentum. They added that stock and options trading volumes are trending toward some of the highest levels this year, providing a potential counterbalance to continued crypto weakness.
Cantor Fitzgerald, which reiterated its “overweight” rating and $110 price target, said recent activity suggests stabilization. “Preliminary stock and options trading volumes for April are heading toward the highest monthly level this year,” the company wrote, adding that the lack of profits had more to do with market conditions than fundamental business issues.
Another company, Compass Point, echoed this view, maintaining a “Buy” rating while lowering its price target slightly to $107. The company said the market reaction appears “hindsighted,” given expectations for a stronger second quarter.
Although both brokerages are optimistic about Robinhood’s prospects, some analysts have cautioned that there are still risks, particularly in crypto trading, that are expected to continue to weigh on near-term results amid falling volumes and pricing pressure in the sector.
Investment bank Keefe, Bruyette & Woods (KBW), which already had the lowest price target on the stock, according to FactSet data, cut it further. The company’s analysts, who give the stock a “Hold” rating, warned that falling transaction fees could persist and cut their target to $65 from $75.
“Catch rate [are] lacking across the board,” the firm’s analysts said, noting that crypto and options take rates continued to decline in the second quarter. This trend has led to lower long-term forecasts, with KBW reducing its earnings estimates through 2028.
That concern didn’t seem to deter one of the top bullish analysts. Bernstein analysts, who maintained their “outperform” rating and a $130 price target, pointed to signs that crypto activity may be stabilizing as April showed no further price declines while stocks and options remain strong.
Additionally, beyond trading, optimistic investors are now turning to new sources of income.
Prediction markets are emerging as a key area, with companies highlighting the growth of event-based contracts and upcoming catalysts such as product launches and global events. Robinhood’s planned market prediction platform, Rothera, is seen as a potential driver of future revenue and margin expansion, Cantor said.
For now, the outlook depends on whether recent gains in business activity continue. If they do, Robinhood could return to growth sooner than expected. Otherwise, pressure on transaction revenues could persist in the second half.
The stock was up about 3% on Thursday, but has fallen about 37% this year. One of its crypto peers that tends to trade partially in tandem, Coinbase (COIN), is up about 3% on the day and is down about 19% year to date.
Read more: Why Cantor Fitzgerald thinks Robinhood and Coinbase are the best ways to profit from the prediction market boom
