Wolfe Research has downgraded Robinhood Markets (NASDAQ: HOOD) from “Outperform” to “Peer Perform”, citing valuation concerns and rising competitive risks.
The firm noted that key factors driving its bullish stance on Robinhood since its June 2024 upgrade have now played out and are reflected in the stock’s current valuation, leaving limited room for further upside. The analyst highlighted that GAAP EPS consensus estimates have surged more than 160% since June 2024 and over 600% in the past 12 months. As a result, the previously optimistic earnings projections have now become the base case.
“While we continue to see a credible path to $2+ EPS by 2026, with shares trading at ~30x that figure, consistent with other growth financials, the upside appears fully baked,” the analysts wrote.
In addition to valuation concerns, Wolfe Research flagged increasing competitive pressures from traditional financial giants such as Fidelity and Schwab, which could challenge Robinhood’s dominance in the crypto trading space.
This downgrade comes just days after Robinhood Markets (NASDAQ: HOOD) posted better-than-expected earnings for the fourth quarter. The company reported EPS of $1.01, vastly outperforming FactSet consensus estimate of 42 cents. Revenue surged 115% year-over-year to $1.01 billion, easily beating expectations of $945.8 million.
Robinhood saw a significant rise in transaction-based revenue, which grew 200% to $672 million. Crypto trading played a major role in this surge, with revenue soaring 700% to $358 million. Options revenue also rose 83% to $222 million, while equities revenue grew 144% to $61 million. Net interest revenue climbed 25% to $296 million.
For 2024, the upstart online broker achieved its first full-year profit, reporting $1.56 per share compared to the anticipated 95 cents, reversing a loss of 61 cents per share in 2023.
Robinhood has refrained from offering specific guidance for operating expenses in 2025. Analysts forecast a 14% decline in earnings to $1.34 per share in 2025, amid tougher comparisons from the previous year.
