Is Robinhood Markets Inc. (HOOD) a Buy After Recent Volatility?

PUBLISHED Apr 30, 2025, 2:07:22 AM        SHARE

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Robinhood Markets Inc. (HOOD) has experienced significant price swings over the past year, making it a focal point for investors looking for opportunities in the online brokerage space. Currently trading at $43 per share, Robinhood has rallied after a 44% decline from its previous high of $66, raising the question: Is now the right time to buy?

Robinhood’s Price History and Market Performance

Since its IPO at $60 per share, Robinhood has faced dramatic ups and downs, including a major selloff to around $10 per share due to the GameStop (GME) controversy. However, since 2024, the stock has surged nearly 500% before seeing a more recent pullback.

To determine its potential as a buy, let’s analyze Robinhood’s latest earnings and apply valuation models including:

  • Discounted Free Cash Flow (DCF) Model
  • Comparable Company Analysis
  • Ben Graham Formula for Intrinsic Value

Analyzing Robinhood’s Financials

Earnings and Growth Metrics

Robinhood’s latest quarterly results highlight impressive growth:

  • Revenue: Reached an all-time high of $2.4 billion, up from $1.9 billion a year prior.
  • Net Income: Turned profitable at $530 million.
  • Free Cash Flow: Strong generation of $2.15 billion.
  • Robinhood Gold Subscribers: Grew 86% YoY to 2.6 million.
  • Cryptocurrency Revenue: Surged 700% YoY to $358 million.

Valuation Metrics

  • Market Cap: $38 billion
  • Price-to-Earnings (P/E) Ratio: 28.4, slightly below the market average of 28.3.
  • Earnings Per Share (EPS): $1.56
  • Beta: 2.14, indicating high volatility.

Valuation Models: Is Robinhood Undervalued?

Discounted Free Cash Flow (DCF) Analysis

Using expected revenue growth of 20–30%, analysts project future revenues of $3.7–4 billion. With an average net income margin of 22%, the DCF model suggests a fair value of $50 per share, with potential upside.

Ben Graham Formula for Intrinsic Value

Applying projected growth of 15%, Robinhood’s fair value lands near $30 per share. However, a declining AAA bond yield could push this higher.

Comparable Company Analysis

Compared to Charles Schwab (SCHW) and Interactive Brokers Group (IBKR):

  • Robinhood’s revenue and net income growth are the highest.
  • Robinhood has the highest P/E ratio, suggesting overvaluation relative to peers.
  • Compared to mature brokerage firms, Robinhood trades at a premium due to its high growth potential.

Conclusion: Is Robinhood a Buy?

Robinhood’s strong revenue growth, profitability, and expanding subscription base make it a compelling investment. However, valuation concerns arise when compared to established competitors.

  • DCF Model suggests upside potential to $50 per share.
  • Comparable analysis highlights overvaluation relative to peers.
  • Crypto expansion and increased subscriptions fuel future growth.

Investors seeking high-growth opportunities may find Robinhood appealing, but volatility and valuation risks must be considered.

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