Some big Wall Street investors and analysts are ignoring Robinhood’s (HOOD) nearly 12% drop since losing its big gains.
The popular trading platform missed its first-quarter earnings and revenue estimates on April 28, primarily due to weaker crypto trading activities. The market punished the stock for the mistake, but Cathie Wood’s Ark Invest saw that as an opportunity and bought about $39.7 million in shares the next day, indicating confidence in the trading platform’s future. Robinhood remains a significant holding in all of Ark’s portfolios, representing approximately 3% and among the top holdings in all three funds.
The countermeasure appears to have come at the same time as Wall Street analysts, who agreed that the failure was just a blip for the company, and data from early April points to improving momentum. They added that stock and options trading volumes are trending toward some of the strongest levels this year, offering a potential counterbalance to continued weakness in cryptocurrencies.
Cantor Fitzgerald, who reiterated his “overweight” rating and $110 price target, said recent activity suggests stabilization. “Preliminary April stock/option trading volumes are moving toward the highest monthly level this year,” the firm wrote, adding that the lack of gains was more tied to market conditions than core trading issues.
Another company, Compass Point, echoed that sentiment and maintained a “Buy” rating while slightly lowering its price target to $107. The company said the market reaction appears “backward-looking,” given expectations for a stronger second quarter.
While both brokers are optimistic about Robinhood’s prospects, some analysts cautioned that there are still risks, particularly in cryptocurrency trading, that will likely continue to weigh on results in the near term amid lower volumes and price pressure across the sector.
Investment bank Keefe, Bruyette & Woods (KBW), which already had the lowest price target on the stock, according to FactSet data, lowered it further. The company’s analysts, who rated the stock a ‘Hold’, warned that declining transaction fees could persist and lowered their target to $65 from $75.
“Capture rates [are] “They are lacking across the board,” the firm’s analysts said, noting that both cryptocurrency and options take rates have continued to decline in the second quarter. That trend has led to lower long-term forecasts, with KBW cutting earnings estimates through 2028.
That concern did not appear to deter one of the leading bullish analysts. Analysts at Bernstein, who maintained their “Outperform” rating and a $130 price target, pointed to signs that crypto activity may be stabilizing, as April has shown no further price declines while stocks and options remain strong.
Furthermore, beyond trading, bullish investors are now turning their attention to new sources of income.
Prediction markets are emerging as a key area, with companies highlighting the growth of event-based contracts and upcoming catalysts such as product launches and global events. Robinhood’s planned prediction markets platform, Rothera, is seen as a potential driver of future revenue and margin expansion, Cantor said.
For now, the outlook depends on whether recent gains in business activity can continue. If they do, Robinhood could return to growth sooner than expected. Otherwise, pressure on transaction revenue could persist into the second half of the year.
The stock rose about 3% on Thursday, but is down about 37% this year. One of its crypto peers that tends to trade partially together, Coinbase (COIN), is up about 3% on the day and is down about 19% so far this year.
Read more: Why Cantor Fitzgerald thinks Robinhood and Coinbase are the best ways to take advantage of the prediction market boom
