Robinhood Stock Price Hits $100, But A Key Risk Remains

Key Insights:

• Robinhood stock price has surged to $100 this week.
• It has jumped by over 320% in the last 12 months.
• The risk is that the stock has become highly overvalued.

Robinhood stock price has gone parabolic this year and crossed the important resistance point at $100. HOOD has jumped by over 320% in the last 12 months and by 160% this year. This surge could be on the verge of a bearish breakdown amid significant valuation risks.

Robinhood Stock Price Crossed $100

HOOD stock has been in a strong bull run in the past few years, moving from a low of $6.7 in 2022 to $100 today. This surge has driven its market capitalization from a low of $5.65 billion to nearly $90 billion today.

HOOD shares have jumped because of its strong revenue and profitability growth over the years. Its annual revenue has soared from $958 million in 2021 to over $3.26 billion in the trailing twelve months, a 240% surge.

The company’s growth was primarily driven by its commission-free trades, innovation, investment in the crypto industry, including ETH & SOL staking, and its adoption of the subscription model.

Most recently, the Robinhood stock surged after the company unveiled plans to launch tokenized stocks, which it will offer to European clients. It will initially tokenize these assets through Arbitrum, the second-biggest layer-2 network in the crypto industry.

Robinhood will then transition from Arbitrum to its independent layer-2 blockchain, which will be based on Arbitrum’s technology. Its layer-2 network will be similar to Base, which Coinbase launched in 2023. Base has attracted developers and users, and is now the biggest layer-2 blockchain in crypto.

In addition to revenue growth, Robinhood has become highly profitable. It made a net loss of $3.6 billion in 2021, $1.02 billion in 2022, and $541 million in 2023. It then moved into the profit-making territory in 2024, making $1.4 billion in profits.

Robinhood Earnings Ahead and Valuation Concerns

The next important catalyst for the Robinhood stock price is its upcoming earnings on July 30th. These results will reflect its recent acquisition of Bitfinex, one of the top companies in the crypto industry.

Data compiled by Yahoo Finance shows that the average revenue estimate will be $897 million, up by 31.6% from the same period last year. The average earnings estimate is that its EPS will be 34 cents, up from 30 cents last year.

There is a high probability that Robinhood’s earnings will be higher than expected, as the company has done in the last five consecutive quarters.

Still, the HOOD stock price faces a major risk in that its valuation has become highly stretched. Valuation metrics compiled by Seeking Alpha show that HOOD has a forward price-to-earnings (PE) ratio of 77 and a non-GAAP metric of 65.

These metrics are much higher than the financials segment of less than 50. They are also much lower than the technology sector median of 30, and the S&P 500 Index multiple of less than 30.

The hefty valuation metric means that the company could be at a significant risk of a valuation reset if it publishes weak results or issues weak forward guidance.

HOOD Stock Price Analysis

The daily timeframe shows that the Robinhood stock price has been in a strong bull run in the past few years. It crossed the important resistance level at $66.75, the highest point on February 13.

The risk, however, is that the stock has become highly overbought, with the Relative Strength Index (RSI) and the Stochastic Oscillator having moved to the overbought zone. Further, the stock price is much higher than the 50-day and 100-day Exponential Moving Averages (EMA).

The risk here is that it could go through mean reversion. It is a situation where an asset retreats and moves back to its historical averages. If this happens, Robinhood stock price may drop to the 100-day moving average at $64, down by 35% below the current level.

Disclaimer

This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.