You’d probably expect Robinhood Markets (NASDAQ:HOOD) to generate strong revenue from stock trading, but remember that Robinhood also offers crypto trading. With Bitcoin (BTC-USD) reaching for the heavens, I am bullish on HOOD stock and anticipate higher share prices, even after the recent rally.
Robinhood Markets started a revolution years ago by offering commission-free stock and option trading on its popular app-based platform. Adding cryptocurrency trading to the platform might have seemed like a risky move at one time, but now it seems to be paying off for Robinhood.
I’ll admit that I was reluctant to take a bullish position on HOOD stock after watching it rise from $11 in February to $18 recently. Yet, even contrarian investors can’t deny that Robinhood’s business is growing quickly. So, before making a judgment about Robinhood, let’s see why the market is enthused about the company and why one analyst is preparing for a “monster” of a move in crypto-related assets.
Robinhood’s Trading Volumes Rise Across the Board
Robinhood stock flew higher today, but there’s no earnings report to discuss at the moment. Rather, the buzz is mostly about Robinhood’s impressive monthly increase in trading volumes, which applies across the board to stocks, options, and cryptocurrency trading.
Perhaps this shouldn’t be too surprising, as large-cap stocks have traded near their all-time highs for a while now. In addition, Bitcoin broke above its previous peak of $69,000 not long ago. This explains why retail traders are so eager to buy stocks and cryptocurrency, though there may also be some profit-taking happening. Either way, Robinhood benefits from both purchases and sales of these assets.
Even amid this favorable backdrop for a trading platform like Robinhood, the company’s February trading volume stats are quite impressive. Compared to January, Robinhood’s equity notional trading volumes grew by 36% to $80.9 billion. Meanwhile, the company’s options contracts traded increased by 12% month-over-month to 119.1 million, and Robinhood’s cryptocurrency notional trading volumes rose 10% to $6.5 billion.
Along with all of that, Robinhood’s assets under custody at the end of February increased by 16% month-over-month to $118.7 billion. Now, you might think that a 10% increase in crypto trading volume isn’t very impressive. Bear in mind, though, that this happened in just one month’s time.
I don’t expect this to happen every month, but if it did, then Robinhood’s cryptocurrency trading volume would theoretically grow by more than 3x in a year due to the effect of compounding. So now, it makes sense that HOOD stock is rising, and investors are in a bullish mood.
Could Robinhood Stock Rally to $30 on a “Monster” Crypto Cycle?
Adding fuel to the bulls’ fire is Bernstein analyst Mahika Sapra, who recently initiated coverage of HOOD stock with a Buy rating and a $30 price target. Even after the rally that just happened, Sapra’s price target implies share price upside of more than 66%.
Could Robinhood actually get there? It’s certainly possible if, as Bernstein analysts proposed, there’s a “monster of a crypto cycle” coming in the next year or two. Gautam Chhugani, another Bernstein analyst, wrote, “Now is the best time to enter Robinhood, in our view, with an 18-24 month window, to ride the crypto comeback.”
Furthermore, Bernstein analysts provided some specific numerical targets. “We expect total crypto market cap to reach $7.5T by 2025 versus $2.6T today,” they predicted.
Here’s where I might object a little bit. Bear in mind that it’s already March 2024. If the total cryptocurrency market capitalization is $2.6 trillion now, then getting it to $7.5 trillion “by 2025” would mean almost tripling it in a year’s time.
Anything’s possible in the financial markets, but I’m not going to buy a stock based on a thesis that the crypto market will nearly triple in a year, right after it just surged. Thus, while I can envision HOOD stock continuing to rally from its current price, $30 may be overly optimistic in the near term.
Is HOOD Stock a Buy, According to Analysts?
On TipRanks, HOOD comes in as a Hold based on four Buys, six Holds, and three Sell ratings assigned by analysts in the past three months. The average Robinhood Markets price target is $16.17, implying 10.4% downside potential.
If you’re wondering which analyst you should follow if you want to buy and sell HOOD stock, the most profitable analyst covering the stock (on a one-year timeframe) is Devin Ryan of JMP Securities, with an average return of 16.41% per rating and a 65% success rate. Click on the image below to learn more.
Conclusion: Should You Consider HOOD Stock?
As you can see, analysts aren’t overwhelmingly bullish about Robinhood Markets stock. However, they might end up revising their price targets higher and upgrading Robinhood shares after seeing the company’s impressive February trading volumes.
On the other hand, Robinhood’s investors should be realistic. Personally, I’m not betting on the Robinhood share price zooming to $30 in the next 12 months, even though anything is possible in theory. Nevertheless, based on Robinhood’s across-the-board trading-volume growth, I am bullish on HOOD stock and am considering it for a long position.
