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HOOD Stock Hits 3-Year High: Time to Buy Before Q4 Earnings Tomorrow?
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Shares of Robinhood Markets (HOOD - Free Report) touched a three-year high of $57.27 during yesterday’s trading, a couple of days before the release of its fourth-quarter and full-year 2024 results. The company is scheduled to announce results tomorrow after market close.
Stay up-to-date with all quarterly releases: See ZacksEarnings Calendar.
Robinhood’s third-quarter performance was impressive. Results benefited from the crypto-trading boom, higher net interest income (NII) and a jump in Gold subscribers. These drove the company’s top line.
Transaction revenues, HOOD’s largest revenue source, soared 72% year over year. This was driven by improvement in cryptocurrencies and options revenues. This time also, solid client activity and higher volumes are expected to have resulted in higher trading activities.
Robinhood has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with the average beat being 173.61%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for quarterly revenues of $940.65 million suggests a 99.7% improvement on a year-over-year basis. Further, in the past week, the consensus estimate for earnings has been revised 2.4% north to 42 cents. This indicates a whopping 1,300% jump.
Image Source: Zacks Investment Research
Is now a good time to add the HOOD stock to your portfolio before it takes off following the earnings release? Let’s analyze the factors that will influence HOOD’s performance this time.
Factors to Note & Estimates for HOOD’s Q4 Results
Revenues: During the fourth quarter, client activity was robust, with the major indexes touching all-time highs. This was majorly attributable to the U.S. presidential election victory of Donald Trump. Hence, Robinhood’s transaction revenues are expected to have soared like its peers Interactive Brokers (IBKR - Free Report) and Charles Schwab (SCHW - Free Report) .
IBKR, which released its fourth-quarter results on Jan. 21, witnessed a 37% year-over-year jump in commissions. SCHW, which also announced quarterly numbers on Jan. 21, recorded 14% growth in trading revenues.
The Zacks Consensus Estimate for HOOD’s transaction-based revenues is pegged at $610.3 million, indicating a substantial jump from $200 million in the prior-year quarter. This is likely to have been driven by higher options, equity and cryptocurrencies transaction revenues.
The consensus estimate for options transaction revenues is $234.8 million, suggesting 94% growth. Further, the Zacks Consensus Estimate for equity and cryptocurrencies transaction revenues are $49.8 million and $310.6 million, respectively. Equity transaction revenues are projected to surge 99%, while cryptocurrencies transaction revenues are estimated to jump 622% year over year.
Further, relatively higher interest rates are expected to have immensely supported Robinhood’s NII in the to-be-reported quarter despite the Federal Reserve lowering interest rates. The consensus estimate for NII is $277.1 million, implying a 17% rise.
The Zacks Consensus Estimate for other revenues is pegged at $47.1 million, suggesting a 35% increase from the prior-year quarter.
Expenses: Total operating expenses are likely to remain elevated as the company invests in key areas to enhance platform capabilities, drive product innovation, improve customer support and build upon regulatory and compliance functions. Also, the pending acquisitions are likely to have resulted in some restructuring/merger-related charges during the quarter.
What Our Model Unveils for Robinhood Stock
Our quantitative model predicts an earnings beat for Robinhood this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is the case here, as you can see below.
Robinhood has an Earnings ESP of +4.40%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Robinhood shares are having a remarkable run on the bourses, especially since the announcement of the U.S. presidential poll results. In the fourth quarter of 2024, the stock soared 279.8% compared with the financial investment bank industry’s rise of 63.9%.
Image Source: Zacks Investment Research
Now, let’s look at the value Robinhood offers investors at current levels.
Currently, HOOD is trading at 7.29X 12-month trailing Price/Tangible Book (P/TB), above its three-year median of 1.40X. Meanwhile, the industry’s P/TB TTM multiple is at 3.10X. Hence, the stock looks expensive compared with the industry average.
Image Source: Zacks Investment Research
Investment Thesis for Robinhood
Robinhood is on the right path to expand/diversify operations. Given the volatility in the stock market because of several macroeconomic developments, the company will keep benefiting from rising trading volume.
Apart from this, HOOD’s initiatives to keep adding new products and services and plans to become a global entity by venturing across Europe and Asia Pacific regions, organically and through buyouts, align with its expansion efforts. Hence, the company is well-poised to ride the growth trajectory.
Robinhood’s plans to focus on the cryptocurrency space through increased tokenization, enhanced capabilities and expansion into the EU markets will lead to further cost efficiency.
Also, in May 2024, Robinhood announced a share buyback plan, authorizing the repurchase of up to $1 billion worth of shares. While the plan doesn’t have an expiration date, the company expects to buy back shares in two to three years. As of Sept. 30, 2024, roughly $903 million worth of authorization remained available for repurchase.
Buy HOOD Stock Ahead of Q4 Earnings?
A favorable operating backdrop, inorganic expansion plans, efforts to diversify the top line to become less dependent on transaction revenues and the launch of new products and services position Robinhood well for robust fourth-quarter results.
Further, with strong earnings projections, HOOD is well-poised to deliver sustained growth. Investors must watch for management comments on how the company plans to navigate the current operating environment and its future expansion efforts.
With the quarterly performance expected to be outstanding, HOOD stock will likely soar further. Hence, it is advisable to buy the stock before it is too late.
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HOOD Stock Hits 3-Year High: Time to Buy Before Q4 Earnings Tomorrow?
Shares of Robinhood Markets (HOOD - Free Report) touched a three-year high of $57.27 during yesterday’s trading, a couple of days before the release of its fourth-quarter and full-year 2024 results. The company is scheduled to announce results tomorrow after market close.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Robinhood’s third-quarter performance was impressive. Results benefited from the crypto-trading boom, higher net interest income (NII) and a jump in Gold subscribers. These drove the company’s top line.
Transaction revenues, HOOD’s largest revenue source, soared 72% year over year. This was driven by improvement in cryptocurrencies and options revenues. This time also, solid client activity and higher volumes are expected to have resulted in higher trading activities.
Robinhood has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with the average beat being 173.61%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for quarterly revenues of $940.65 million suggests a 99.7% improvement on a year-over-year basis. Further, in the past week, the consensus estimate for earnings has been revised 2.4% north to 42 cents. This indicates a whopping 1,300% jump.
Image Source: Zacks Investment Research
Is now a good time to add the HOOD stock to your portfolio before it takes off following the earnings release? Let’s analyze the factors that will influence HOOD’s performance this time.
Factors to Note & Estimates for HOOD’s Q4 Results
Revenues: During the fourth quarter, client activity was robust, with the major indexes touching all-time highs. This was majorly attributable to the U.S. presidential election victory of Donald Trump. Hence, Robinhood’s transaction revenues are expected to have soared like its peers Interactive Brokers (IBKR - Free Report) and Charles Schwab (SCHW - Free Report) .
IBKR, which released its fourth-quarter results on Jan. 21, witnessed a 37% year-over-year jump in commissions. SCHW, which also announced quarterly numbers on Jan. 21, recorded 14% growth in trading revenues.
The Zacks Consensus Estimate for HOOD’s transaction-based revenues is pegged at $610.3 million, indicating a substantial jump from $200 million in the prior-year quarter. This is likely to have been driven by higher options, equity and cryptocurrencies transaction revenues.
The consensus estimate for options transaction revenues is $234.8 million, suggesting 94% growth. Further, the Zacks Consensus Estimate for equity and cryptocurrencies transaction revenues are $49.8 million and $310.6 million, respectively. Equity transaction revenues are projected to surge 99%, while cryptocurrencies transaction revenues are estimated to jump 622% year over year.
Further, relatively higher interest rates are expected to have immensely supported Robinhood’s NII in the to-be-reported quarter despite the Federal Reserve lowering interest rates. The consensus estimate for NII is $277.1 million, implying a 17% rise.
The Zacks Consensus Estimate for other revenues is pegged at $47.1 million, suggesting a 35% increase from the prior-year quarter.
Expenses: Total operating expenses are likely to remain elevated as the company invests in key areas to enhance platform capabilities, drive product innovation, improve customer support and build upon regulatory and compliance functions. Also, the pending acquisitions are likely to have resulted in some restructuring/merger-related charges during the quarter.
What Our Model Unveils for Robinhood Stock
Our quantitative model predicts an earnings beat for Robinhood this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is the case here, as you can see below.
Robinhood has an Earnings ESP of +4.40%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
It sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
HOOD Stock Price Performance & Valuation
Robinhood shares are having a remarkable run on the bourses, especially since the announcement of the U.S. presidential poll results. In the fourth quarter of 2024, the stock soared 279.8% compared with the financial investment bank industry’s rise of 63.9%.
Image Source: Zacks Investment Research
Now, let’s look at the value Robinhood offers investors at current levels.
Currently, HOOD is trading at 7.29X 12-month trailing Price/Tangible Book (P/TB), above its three-year median of 1.40X. Meanwhile, the industry’s P/TB TTM multiple is at 3.10X. Hence, the stock looks expensive compared with the industry average.
Image Source: Zacks Investment Research
Investment Thesis for Robinhood
Robinhood is on the right path to expand/diversify operations. Given the volatility in the stock market because of several macroeconomic developments, the company will keep benefiting from rising trading volume.
Apart from this, HOOD’s initiatives to keep adding new products and services and plans to become a global entity by venturing across Europe and Asia Pacific regions, organically and through buyouts, align with its expansion efforts. Hence, the company is well-poised to ride the growth trajectory.
Robinhood’s plans to focus on the cryptocurrency space through increased tokenization, enhanced capabilities and expansion into the EU markets will lead to further cost efficiency.
Also, in May 2024, Robinhood announced a share buyback plan, authorizing the repurchase of up to $1 billion worth of shares. While the plan doesn’t have an expiration date, the company expects to buy back shares in two to three years. As of Sept. 30, 2024, roughly $903 million worth of authorization remained available for repurchase.
Buy HOOD Stock Ahead of Q4 Earnings?
A favorable operating backdrop, inorganic expansion plans, efforts to diversify the top line to become less dependent on transaction revenues and the launch of new products and services position Robinhood well for robust fourth-quarter results.
Further, with strong earnings projections, HOOD is well-poised to deliver sustained growth. Investors must watch for management comments on how the company plans to navigate the current operating environment and its future expansion efforts.
With the quarterly performance expected to be outstanding, HOOD stock will likely soar further. Hence, it is advisable to buy the stock before it is too late.