19d • General discussion
Making a case for Robinhood: HOOD
Robinhood Markets. Ticker symbol: HOOD surged over 15% on Monday 9/8, after S&P Global announced it will join the S&P 500 index, replacing Caesars Entertainment effective September 22, 2025—triggering expected strong buying from passive index funds and marking a major milestone for the firm.
Let's look at a high level analysis of this company to find out if it's worth inclusion in any portfolio.
- Return to strong profitability and positive net income (Bullish Impact)
HOOD swung from multi-year losses to a net income of $1.41 billion in 2024, as aggressive cost cuts and expansion into crypto and product diversification drove a dramatic turnaround, outperforming key peers and coinciding with a 151% stock rally attributed to new initiatives like tokenization and AI-assisted trading.
2.Significant expansion and diversification strategy (Bullish Impact)
Robinhood executed major acquisitions and launched new products (crypto expansion, prediction-markets hub, international and AI-driven tools), supporting a marked increase in revenue and gross profit unlike competitors, and positioning itself for global market penetration that fueled investor confidence and record share price highs in 2025.
3.Robinhood delivered strong Q2 results with revenues up 45% year over year to $989M, adjusted EBITDA margins at 56%, and EPS more than doubling. Net deposits continued momentum, with July starting strong at ~$6B, putting the company on track to exceed last year's $50B record.
Product innovation drove growth across key focus areas: record trading volumes in equities, options, index options (up 60% QoQ), and prediction markets (nearly 1B contracts in Q2), along with new product launches like mobile tools, Cortex for Gold members, and rapid adoption of the Robinhood Gold card (over 300K cardholders, tripled YTD).
Assets under custody more than doubled YoY to over $250B, with average assets per funded customer above $10K for the first time. Retirement assets surpassed $20B and Gold subscribers hit a record 3.5M (13% of customer base; >35% among new customers). Over 600K international customers were added, including via the Bitstamp acquisition.
Expansion in international and crypto: European offerings now reach 30 countries and over 400M people with stock tokens and imminent perpetual futures, while in the US, staking launched with over $750M staked in the first month. The Bitstamp acquisition closed, growing the institutional business. Robinhood Chain (Layer 2 blockchain for real world assets) is in development, leveraging a large customer base as a competitive advantage.
FINAL THOUGHTS:
I don't want to bore you all with analysis information but please note the following:
From a GARP investing perspective, Robinhood fails key value criteria despite strong growth metrics. The analysis reveals a GARP score of 4/8, rating it as a "moderate GARP candidate" with significant concerns:
Growth Strengths:
- Revenue growth of 45% (exceeds 15% threshold) ✓
- EPS growth of 105% (exceeds 15% threshold) ✓
Value Concerns:
- PEG ratio of 2.53 (significantly above GARP target of ≤1.0) ✗
- P/E ratio of 59.69 (far exceeds GARP preference of ≤20-30) ✗
DCF(Discounted Cash Flow) Analysis indicates severe overvaluation. Multiple DCF models converge on intrinsic values between $26-30 per share, compared to the current price of $117.28, suggesting 75% overvaluation. This represents a margin of safety of -295%, indicating extreme downside.
So,
AVOID at current levels. While Robinhood demonstrates impressive growth fundamentals, the risk-reward profile violates core GARP principles:
- Wait for significant price correction - Target entry below $40-45 (closer to intrinsic value)
- Monitor PEG ratio improvement - Wait for PEG to approach 1.0 or below
- Watch for earnings multiple compression - Target P/E below 30 for GARP consideration
- Track regulatory clarity - Ensure PFOF and gamification concerns are resolved
Alternative approach: Consider dollar-cost averaging small positions if the stock corrects 50%+ from current levels, but only after confirming sustainable revenue diversification away from volatile crypto/options trading.
The current valuation suggests most positive catalysts are priced in, while significant downside risks remain unappreciated by the market. For GARP investors seeking quality growth at reasonable prices, Robinhood represents a "wait for better entry" opportunity rather than a current buy recommendation.
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Making a case for Robinhood: HOOD
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