Robinhood Stock Forecast Ahead of Earnings as Valuation Concerns Persist

Robinhood stock has rebounded in the past few months, moving from the year-to-date low of $64 to a high of $120. Focus now shifts to the company’s earnings on July 29, which will provide more information about its growth as valuation concerns remain.

Robinhood to Publish Second Quarter Earnings

HOOD stock price will be in the spotlight in the coming weeks as the earnings season gets underway. Top US banks like Goldman Sachs, Morgan Stanley, JPMorgan, and Citigroup will publish their earnings on Tuesday this week.

These companies will provide more details about the volume of stocks and options traded by retail and institutional investors during the second quarter. They will, in turn, provide more information about the state of the market amid the US-Iran war and as the tech boom continues.

Robinhood will then publish its financial results later this month, which will give more information about its revenue growth. Its recent data shows that its business continues to grow.

The number of funded customers rose to 27.7 million in May from 27.4 million in March, while the total platform assets jumped to $377 billion during the month. It has been in an uptrend after bottoming at $307 billion in March when the US-Iran war started.

Most notably, the number of event contracts traded continued rising in June, moving from 3.9 billion in May to 5.2 billion in June as the number of World Cup predictions jumped.

Therefore, with these numbers, analysts believe that the company’s revenue jumped by 26.8% in the second quarter to $1.25 billion. This makes it one of the fastest-growing companies in the industry, with Webull’s growth estimated at 10% and Interactive Brokers coming in at 18.53%.

Valuation Concerns Remain

There are a few concerns about Robinhood’s business, with the most notable one being its slowing crypto business. Crypto volumes and revenue have dropped sharply in the past few months, a trend that may continue now that Bitcoin and Ethereum are stuck in a bear market.

The other key challenge is that its valuation metrics have soared in the past few months. For example, the forward price-to-earnings ratio has jumped to 48, higher than the five-year average of 36. The GAAP forward multiple has moved to 58, which is higher than S&P 500 Index’s 22. The financial sector average is normally less than 15.

These multiples mean that Robinhood is valued more richly than some of the biggest companies in the United States like Nvidia, Micron, and SanDisk.

The only valuation approach where HOOD stock does well is using the Rule-of-40, which looks at its revenue growth and margins. In its case, it has a profit margin of 41% and an annual revenue growth rate of 40%, giving it a multiple of 81%.

Robinhood has more ways to justify its expensive valuation, including its large and growing market share in the trading industry. It is also benefiting from its innovation, including the recently launched Robinhood Chain that continues to gain market share in the layer-1 and layer-2 spaces. It has become a big name in the real-world asset (RWA) tokenization industry.

Robinhood Stock Price Technical Analysis

Technicals suggest that the HOOD stock price has more upside in the coming weeks. It has already formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) have crossed each other. A golden cross pattern normally lead to more gains over time.

It has also continued forming a series of higher highs and higher lows, and moved above the Ichimoku cloud indicator.

Therefore, despite valuation concerns, the stock may continue to rise in the coming days as investors await its earnings report. Further gains could see it reach an all-time high of $154.

However, a weak financial result will lead to profit-taking among investors, which may push it lower to the key support at $95.32.