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On Monday, Redburn-Atlantic analysts downgraded Robinhood Markets (NASDAQ: NASDAQ:HOOD) stock rating from Neutral to Sell, while raising the price target to $48 from $40. Trading at $74.88 and showing a remarkable 237% return over the past year, the stock has reached levels where InvestingPro analysis suggests it may be overvalued. The decision reflects concerns about the sustainability of recent improvements and challenges in Robinhood’s business model.
According to the analysts, Robinhood has shown a significant turnaround since the market fluctuations of 2021-23. With revenue growth of nearly 60% and an impressive 91% gross margin in the last twelve months, the company has become more disciplined and diversified, with improvements in customer and deposit growth. However, the analysts express uncertainty regarding the durability of these gains, particularly in light of the company’s reliance on trading activity, which is influenced by market cycles. InvestingPro subscribers can access 12+ additional exclusive insights about Robinhood’s financial health and market position.
The analysts also highlight risks associated with Robinhood’s global expansion and integration of recent acquisitions. Despite a rerating driven by optimism in the cryptocurrency sector, Robinhood’s valuation remains at a premium compared to its peers, with lower margins and more volatile earnings.
The analysts’ earnings per share estimates for Robinhood over the 2025-27 period are approximately 11% below consensus. They note the significant risk involved, as well as the high beta of the stock, which raises the bar for maintaining an active rating.
In other recent news, Robinhood Markets has made significant strides with the completion of its acquisition of the European crypto exchange Bitstamp for $200 million in cash. This acquisition broadens Robinhood’s reach into the institutional crypto market, marking its first exposure to institutional clients and expanding its presence in Europe. Bitstamp, which serves 500,000 retail and 5,000 institutional customers, reported a revenue increase to $95 million for the 12 months ending April 30, 2025. Piper Sandler analysts have maintained their Overweight rating on Robinhood, with a $70 price target, citing the acquisition as a positive development that strengthens Robinhood’s competitive position in the cryptocurrency sector.
Additionally, Robinhood announced the expansion of its desktop platform to UK retail investors, providing them with access to advanced trading tools. This move aligns with the company’s ongoing efforts to enhance its platform and services for a growing user base. In other developments, Robinhood shares experienced a decline following Moody’s downgrade of the U.S. credit rating, which led to a broader trend of risk aversion in the market. Despite these fluctuations, Piper Sandler remains optimistic about Robinhood’s potential to capitalize on the current market dynamics. The firm highlights Robinhood’s diversified business model and its comprehensive cryptocurrency offerings as key factors in maintaining its robust positioning.
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