Robinhood Analyst Projects 31% Upside, Says Trading Platform 'More Batman Than Robin'

Author: Surbhi Jain | June 26, 2024 02:40pm

Robinhood Markets Inc. (NASDAQ:HOOD) just got a significant vote of confidence from Wolfe Research analyst Steven Chubak, who upgraded the stock from Peer Perform to Outperform, citing strong growth prospects and a durable earnings trajectory. The upgrade follows an insightful meeting with CFO Jason Warnick, which bolstered Chubak’s bullish stance on the stock.

Key Takeaways From The Robinhood Stock Upgrade

New Rating and Target: Chubak’s new price target for Robinhood stock is $29, implying a 31% upside from its current price. His base case suggests a +30% GAAP EPS growth, driven by 20%+ net deposit growth and robust account growth.
EPS Growth: Wolfe Research forecasts HOOD’s 2026 GAAP EPS to be about 70% above consensus estimates, suggesting significant undervaluation by the market.
Operating Leverage: With a 90% fixed expense base and 75% incremental margins, HOOD is positioned to capitalize on its strong free cash flow (FCF) generation.

Robinhood Investment Thesis

Robinhood has made significant strides since its IPO, addressing initial concerns about GAAP profitability, retail KPI sustainability, and regulatory risks. “HOOD has demonstrated tangible progress in delivering best-in-class NNA growth, taking share among Active Traders, and executing on new product launches,” said Chubak.

Despite a 74% year-to-date rally, Chubak believes the stock has further room to grow. The stock’s performance has been driven by EPS momentum rather than multiple expansions, and recent investor engagement suggests growing interest from institutional investors and hedge funds, the analyst says.

Also Read: Analyzing Robinhood Markets’s Short Interest

Financial Estimates and Projections:

Wolfe Research projects substantial EPS growth for HOOD:

2023E: EPS Growth of -348.06%
2024E: EPS Growth of 67.66%
2025E: EPS Growth of 65.30%
2026E: EPS Growth of 31.23%

This robust projected growth, along with HOOD's best-in-class incremental margins, underpins Wolfe Research’s $29 price target and justifies a premium multiple compared to eBroker peers.

Beyond the Meme and Crypto Hype

Chubak clarifies that this upgrade is not driven by speculative crypto price increases or a resurgence in meme stocks. Instead, the focus is on fundamental strengths and growth initiatives. He highlights a credible upside case for Robinhood stock reaching $50 if growth initiatives and regulatory clarity come to fruition.

With a 31% upside potential to a $29 price target and a credible path to further gains, Robinhood is shaping up to be “more Batman than Robin” in the investment world, the analyst says.

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