Robinhood (HOOD) Pre-earnings Analysis
Investors have enjoyed a massive gain on their Robinhood shares as the stock moved from lows of 11.43 to highs of 57.00 in just twelve months. The monumental growth can be attributed to the company’s ability to grow its revenue at an average of 35% over the past four quarters, moving from $481M in Q4 2023 to reporting more than $640M in the last quarter. Net income has grown alongside revenue, allowing the company to post its strongest profit margins since its public debut.
What was once a small time, controversial trading app, is now a $47B giant that has more than 24 million funded customers and 11 million monthly users. The company’s little to no consumer fee structure has influenced other trading brokerages to follow-suit and also cut fees, bringing about change to the entire trading and investing world. And their easy to use interface has been a key driver of new customers, especially retail investors.
Looking at this quarter, Robinhood projects quarterly revenue to reach a record $941 million, nearly doubling their results from a year ago. The sentiment coming into this report is upbeat and positive, hence why the stock has rallied into the earnings date, however earnings are often unpredictable as any wrong statements from the company’s leaders could drive prices lower.
If we consider their current numbers, Robinhood is argued to be an overvalued stock right now that’s moving off of overall market momentum. A $47 billion price tag may be anticipating the future growth of a company, which makes it all more important for Robinhood to give strong and uplifting guidance for the full year ahead, or else they risk markets recognizing the expensive valuation and selling off the extended rally.
Option chain analysis:
HOOD’s option chain expiring on February 21st currently reflects an implied volatility reading of 110%, which translates to about a (+/-) $7.50 move from the underlying stock. The direction of that move depends on the earnings outcome.