In 2021, Robinhood, a fintech company offering discount brokerage services for commission-free trading, did their IP. According to different surveys, Robinhood sold its 55 million shares and went public at 38 USD per share price. Recently the price has reduced to 8.41 USD, which is significantly low compared to the IPO price.
There are a lot of questions that more retail investors are trying to answer and want to know about the Robinhood stock price prediction. With the help of this article, we will try to analyze the Robinhood stock price and what it holds for the coming future.
What Is Robinhood (HOOD) And Its Business Segment?
Robinhood is a Fintech or financial technology company that offers many mobiles and web-based financial services, such as investing in ETFs(exchange-traded funds), stocks, and ADRs. Users can also invest in cryptocurrencies through this Application. Most of the revenue generated by Robinhood is through fees related to debit cards, stock loans, membership fees, and conversion fees of cryptocurrencies.
Some of the Robin Hood competitors are large and well-established fintech corporations, cryptocurrency exchanges, and extensive asset management first, such as Mongan Stanely, Coinbase, River Financial Corporation, and many more.
Different Robinhood Business Segments
There are a lot of segments where Robinhood stock offers services. The primary revenue sources are net interest, transaction-based, and other revenues.
The transaction-based revenues are earned through the payment for the order flow Process. The PFOF payments are quite a few fractions of total trade, but they can significantly affect the company’s revenue, whose primary income source is PFOF. In Q4 2021, the total revenue earned through PFOF is approximately 362.7 Million USD, making it a 3/4th share of company revenue.
Net Interest Revenues
Robinhood stock also earns interest from lending and margin loans. The net interest revenue of the company is 63.4 USD which is 1/5th of total company revenue.
Various Other Revenues
Other revenue sources of Robinhood’s revenue are the membership fee of their premium version, Robinhood Gold. Robinhood golds is a premium version that offers a tailormade service such as instant deposits, market research, various margin investment opportunities, and Market Data by Nasdaq. Also, there are other income sources like Rebates and user fees.
Robinhood Stock Performance
Since its IP0, AManytraders believe it can be great in the coming few months. But if we look at its performance, there has been a downfall in price by 77 %. Looking at the weekly analysis recently, the stock was in a positive trend, which means there are still chances that the price would rise and market momentum would be more sustainable.
2021 Q1-Q4 HOOD Performance
Robinhood stock’s price is volatile and has been going downward since its IPO. Many millennials started trading during the initial few months, but in July 2021, the price dropped by 8 percent. But in August 2021, during Intraday trading, the Robinhood stock price surged to an all-time high of USD 85 before it tumbled back to 51. There have been significant fluctuations in the price.
All the traders are expected to trade it cautiously and do proper finance management.
Talking about the recent few months, the stock is now trading at an 85% lower price than in August 2021. Many people have now put this stock in the category of meme stock due to high price fluctuations and considerable interest from retail investors.
Hood Company Profits In The Financial Year 2021-2022
According to the Robinhood stock financial outcome, in Q4 2021, their revenues increased by 14 percent, equaling USD 363 million. But, they have also reported a net loss worth 420 million.
The company had 10 million funded accounts, but the average revenue per account for the quarter was only 64 USD; in 2020, it will be 106 USD. In recent reports, the average number of monthly users is decreased by 8 percent. It only tried to attract young investors, which is a big disappointment.
The company’s financial outlook is not quite promising as the revenue is constantly falling. In Q1 2022, the income was reduced by 340 million, making an average decline of 35 percent.
Will Robinhood Stock Be Able To Recover?
Although the company and the stock performance might look too pessimistic, it is pretty tricky to measure the tangibility of the company’s reputation damage that happed during the AMC and Gamestop fiasco. The Robinhood (HOOD) as a company offered many facilities apart from the commission-free trades.
Also, the platform is quite popular among millennials.
Many companies have suffered huge losses in the stock market, but most recovered in the long run. For example, when Apple lost its reputation due to iCloud hacks, it took no time for them to recover and gain people’s trust. It is expected that Robinhood stock might have a similar kind of price recovery.
Should You Buy, Hold, Or Sell The Robinhood Stock?
Per the Wall Street experts, the stock price is relatively low, although the growth does not seem aggressive. Recently, the stock has been trading at six times the price, and the total net cash is worth $6.3 million, which is 3/4th of the total market cap.
The annualized loss reported by the company is around 1.6 billion, which means even if the company dilutes, it would be able to support losses of approximately four years. The analyst predicts Robinhood’s stock price will gain 30% of its net margin in the future years.
Hence if the company can recover and grow at 25 percent, the Peg Ratio will increase by 1.5 percent, making the 50 percent upside tern. If the company can recover its losses and increase the net cash, there could be substantial potential returns. There are chances Robinhood (HOOD) might not be able to recover losses and reputational damage.
The current revenue of Robinhood stock is mainly through order flow payments. This practice has been quite controversial in recent times. And there are complete chances that Robinhood (HOOD) might need to change its business model if it gets banned.
In a nutshell, various stock market analysts have found a bullish turnaround in the coming few years. Still, most of them emphasize the speculative nature of the thesis, making it quite challenging to make a decision.
Is Robinhood Stock Price Prediction Look Promising For The Long Run?
According to wall street analysts, there might be some delay in reaching a high price. As per the surveys, this stock’s average rating is 3.5 out of 5. Also, the average price target of 14 USD looks like a 50 percent upside from the current price.
Robinhood Stock Price Prediction-Final Words
Although Robinhood (HOOD) has planned many strategies to increase revenue and reduce losses, the stock price is still down by 88 percent from ATH. Stock traders say the fundamentals are still strong despite the company’s falling ARPU. Also, the net cash earned by Robinhood would be helpful to cover the losses for a few years but not for a longer duration.
Many stocks have crashed recently, but they might be the big winner in the coming years. If you want to generate substantial returns from investments, decide intelligently and undertake study and analysis before investing.