Robinhood Stock Forecast for the Next 12 Months

 


Robinhood Stock Forecast for the next 12 Months is $10.5

 

Robinhood Stock Forecast: Next 12 Months’ Forecast is $10.5


Performance of Robinhood Stock in 2022

Robinhood Stock Forecast: 2021 Performance

Price
December 29th, 2021 $16.68
August 4th, 2021 $84.12
December 31st, 2021 $18.12

Robinhood Stock Forecast: Latest News

  1. Robinhood partnership with Circle: Robinhood declared a new partnership with Circle which allows their consumers to buy and sell USDC on Robinhood. It also enables customers to transfer and use USDC on a new Robinhood wallet (currently used in Beta). This also provides in-app educational modules, earning rewards, etc. Through this partnership, Robinhood will use Circle’s payment infrastructure to make efficient settlements. This would begin immediately and become fully integrated in 2023.
  2. SEC allows payment for order flow: According to the reports, SEC would allow payment for order flow and may not ban it as it said in the previous year. This led the stock to soar as most of the Robinhood business is dependent on this, because this allows the broker to offer commission-free trading.
  3. Robinhood launched web3 wallet beta: Robinhood launched web3wallet (beta version) based on polygon which allows customers to trade and swap cryptocurrencies without any network fees.

Robinhood Stock Forecast for the Next 12 Months

Target
Overall $11.5
Morgan Stanley $12
Atlantic Securities $7
Deutsche Bank $10
Mizuho $13

See-Saw Journey Since IPO in Late July

  • Heading into 2021, Robinhood was expected to be one of the most successful IPO, it was widely hyped and investors claimed that Robinhood democratized Wall Street trading, but shares of Robinhood plunged since the company’s debut last year July.
  • The online discount brokerage stock is now trading 40% below its IPO price of $38 a share and is nearly down 75% off an all-time intraday high of $85, Robinhood hit in early August, just a few days after it began trading.
  • Robinhood faced the wrath of investors and the general public after it put restrictions on the purchase of GameStop (GME), a meme stock popular with Reddit traders. The move was questioned by investors as Robinhood’s way of helping the hedge funds who were short on GameStop and were betting against it.
  • Similarly, Robinhood also limited the number of shares an investor could buy in AMC (AMC) and other such meme stocks that were being shorted by big institutional players. The company also disappointed the public with recent quarter results by posting a bigger loss than expected despite a huge surge in the trading volume of cryptocurrencies like bitcoin, Ethereum, and Dogecoin.
  • So, Robinhood has been all over the place in the last six months and is very volatile due to the negative and positive factors inhibited in its business modalities.

The Bear Case of Hood Stock

  • Robinhood disrupted the market by offering commission-free stock trading, Robinhood mainly sells its orders to market big players like high-frequency trading firms (HFTs), which rely on bid-ask spread for their profit of each trade. The critics call this model “payment for order flow” (PFOF) and it prevents retail investors from getting the best price for a stock.
  • The bad news for Robinhood is that it is already banned in Canada, the UK, and Australia, and regulators in the US and Europe have also begun scrutinizing the process and it represents a major chunk of Robinhood revenue. If the PFOF model is banned, Robinhood will have to begin charging commissions and that will hurt Robinhood investors even more.
  • Robinhood is heavily dependent on Dogecoin and 62% of its cryptocurrency-based transaction revenue and 32% of its net revenue in the second quarter is contributed by Dogecoin, a speculative currency that has lost half of its value in the last six months. In the third quarter, that declined significantly to 40% of transaction-based revenue and 8% of its net revenue.
  • The market interest is slowly wading away from Dogecoin and is shifting to Shiba Inu (still not offered on Robinhood) and this might throttle Robinhood’s growth in the near term. To make matters worse, Robinhood’s crypto platform is subjected to regulations evolving around Bitcoin and other cryptocurrencies and if these rules are tightened, Robinhood could suffer even more.
  • Last quarter, Robinhood disappointed Wall Street with its results. Its monthly active users (MAUs), funded accounts, assets under custody (AUC) and average revenue per user (ARPU) all declined sequentially due to a decrease in Dogecoin trades and competition from other free trading platforms and burnout of the “meme stocks”.
  • The company expects revenue to rise 85% this year but it is well below analysts’ expectations of 111% growth. It is also significantly lower than the 245% growth in 2020 and analysts expect revenue to increase by only 22% next year.
  • Robinhood reported revenue of $7.4 million from $958.8 million revenue last year and this year it reported a staggering loss of $3.26 billion for the first 9 months of 2021. $1.25 billion of these losses came from stock-based compensation, which points out that those hefty bonuses were paid to the top executives.
  • A number of users are likely to remain muted, and Dogecoin’s future remains vague, analysts expect Robinhood to remain unprofitable in the coming quarters and so they are bearish on the stock. But there is another side of the coin, the positive side, which is depicted below.

The Bull Case of Robinhood

  • Granted that Robinhood‘s growth through the pandemic was driven by investment fads like meme stocks and speculative cryptocurrency, but what Robinhood has done is it has made a loyal customer base in US youth who have jumped into trading just because of Robinhood, otherwise they would not have done, and this base is going to help Robinhood sail the tide.
  • Robinhood is proving to be agile and innovative and with a customer base of 22 million funded accounts, Robinhood can cross-sell other financial products. Robinhood is adding new features to its crypto brokerage solution which could enable it to fight with Coinbase.
  • Robinhood now trades at much discounted price of 75% lower than all-time high and it gives investors a decent entry point, should Robinhood price again rebound on some other meme stock in near future.
  • Robinhood’s journey resembles Facebook’s (Meta), whose IPO was coincidently being priced at $38 and which saw a major drop in initial months after IPO, but is now a darling of the Wall Street worth nearly $1 trillion.
  • Definitely, for Robinhood there is stiff competition from Morgan Stanley, Fidelity but six analysts have still rated Robinhood as “buy”. Given all factors, it is time to stay low on Robinhood and keenly watch its growth trajectory in the coming quarters.

-Vineet Agarwal

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

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