Robinhood (HOOD) stock price has been in the spotlight this week after the company received a Well’s Notice from the Securities and Exchange Commission (SEC). It was also on focus after the company published encouraging financial results. It was trading at $18 on Wednesday, about 135% from the lowest point in 2023.
Earnings and the Well’s Notice
Robinhood Markets has been a leading game-changer in the financial services industry. It is well-accepted that the company disrupted the brokerage sector by offering commission-free trading. In the aftermath, all the leading companies like Schwab and TD Ameritrade embraced the model.
Robinhood has grown well as the number of customers in the platform rose. In this, its annual revenue jumped from over $277.5 million in 2019 to over $1.865 billion in 2023 and analysts believe that this trend will continue. The average estimate is that its annual revenue will rise to $2.12 billion and $2.14 billion in 2024 and 2025.
Robinhood Markets published encouraging financial results as its revenue continued soaring. Its Q1 revenue surged by almost 40% to over $618 million, helped by a 59% jump in transaction revenue. Cryptocurrency trading revenue soared to $126 million as Bitcoin and other tokens jumped to a record high.
The company is also benefiting from higher interest rates, which helps it to monetize its assets. As a result, it made about $254 million as it invested in short-term government debt. Other revenues rose to $35 million because of its gold subscription business.
This growth happened as the company grew its funded customers by 810k to over 23.9 million. Its total assets rose to $130 billion.
Therefore, looking at its top revenue drivers points to some risks. First, its interest revenue will start falling when the Fed slashes interest rates later this year. Second, its crypto revenue growth will decelerate in Q2 since the prices of most coins have either dropped or deteriorated.
Also, the company is facing regulatory challenges after the SEC alleged that it was offering unregistered securities on the platform. The implication of all this is that the company will either settle or fight to defend itself. If it loses, it could be forced to delist most of its crypto offerings.
Still, despite these risks, I believe that Robinhood is fundamentally a great company because of its popularity among young people. It is also a highly innovative company as evidenced by its decision to start overnight trading and its additional features.
Its financial results revealed that its 24-hour market volume soared to a record high of $10 billion while its retirement business grew its assets to over $4.2 billion.
In the long term, I suspect that Robinhood will continue to gain market share in its key industries. I would also want Coinbase to acquire it, a move that will help it to diversify its revenue sources from the volatile crypto market. With a market cap of $62 billion, Coinbase can engineer a stock and cash deal.
Robinhood stock price forecast
Turning to the daily chart, we see that the HOOD share price has been in a strong bull run in the past few months. It has spiked from last year’s low of $6.80 to over $17. A closer look shows that it crossed the key resistance point at $13.3, its highest point in December and July last year. Moving above that point invalidated its double-top pattern.
The stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA). It has also remained above the Ichimoku cloud indicator. Therefore, the outlook for the Robinhood share price is bullish, with the next point to watch being at $20.
