Robinhood Markets, Inc. (HOOD) shares traded near $92.31 on Friday afternoon, holding steady after a significant move on Thursday when the company reported robust May operating metrics and received a price target increase from Needham & Company.
Needham Raises Price Target
Needham analyst John Todaro raised his price target on Robinhood to $97 from $85, maintaining a Buy rating. The upgrade was driven by a pick-up in equities and event contract activity in the May data, according to Benzinga. Investing.com reported that Needham increased estimates across most categories, even as it reduced crypto volume forecasts. This shift suggests the bull case is increasingly focused on trading activity outside of cryptocurrency.
SpaceX IPO Drives Record Traffic
Robinhood experienced record traffic during the SpaceX IPO rush, but the surge in demand led to platform problems. The Wall Street Journal and MarketWatch reported that user complaints spiked on Friday as SpaceX shares began trading, causing outages on the platform. Downdetector showed a spike in issues near midday before conditions eased. Robinhood attributed the outages to a surge in traffic. This presents a mixed picture for the company: strong demand can boost volumes, but recurring access issues could erode user trust if they persist.
The SpaceX listing is crucial for Robinhood as it leverages retail IPO access to attract active traders. The Associated Press reported that SpaceX planned to allow retail buyers through brokers like Robinhood, Charles Schwab, Fidelity, SoFi, and E-Trade, with individual investors potentially receiving a larger portion of the deal than usual.
May Operating Data Highlights
In May, Robinhood reported funded customers of 27.7 million and total platform assets of $377 billion. Net deposits reached $5.6 billion, while equity notional trading volume hit $315 billion. Event contracts traded climbed to 3.9 billion, and margin balances surged 117% year-over-year to $19.5 billion. These figures underscore the company's strong operating momentum.
Bearish Concerns
Despite the positive data, bearish investors argue that the momentum is already priced into the stock. Crypto notional trading volume on Robinhood's app dropped 50% year-over-year in May, and even with Bitstamp included, total crypto volume only ticked up. In the first quarter, crypto revenue fell 47% year-over-year, although total net revenue rose 15% to $1.07 billion and diluted EPS increased 3% to $0.38. This leaves Robinhood exposed to swings in retail trading, crypto volumes, and the staying power of new initiatives like event contracts.
Valuation and Outlook
Robinhood shares are not cheap. The stock is just below Needham's new $97 target and below the average analyst target of $100.86, based on 27 analysts tracked by StockAnalysis.com and S&P Global. Investors are now focused on the next monthly operating update, watching for continued growth in equity volumes, deposits, margin lending, and event contracts to support the bull case. Weakness in crypto volumes or further platform glitches would provide ammunition for bears.
