TLDR:
- Robinhood (HOOD) stock fell 5.3% after Wolfe Research downgraded it from Buy to Hold, despite recent strong performance
- The company achieved record earnings in 2024 with net revenue of $2.95 billion, up 58% year-over-year
- Cryptocurrency trading revenues increased over 700% year-on-year while equities and options grew 144% and 83% respectively
- Gold subscription service reached 2.64 million subscribers, showing 86% growth year-over-year
- Company posted first full-year GAAP profit of $1.4 billion as a public company
Robinhood (NASDAQ:HOOD) saw its shares decline 5.3% in morning trading on Tuesday after Wolfe Research downgraded the stock from Buy to Hold. The downgrade comes amid valuation concerns, even as the financial services company reports exceptional performance metrics for 2024.
The stock, which has risen 57.8% year-to-date and recently hit a 52-week high of $62.25, has shown remarkable volatility with 38 moves greater than 5% over the past year. Today’s decline brings the current trading price to $60.84, giving the company a market capitalization of $58 billion.
Last week, Robinhood reported fourth-quarter results that exceeded analyst expectations across all major metrics. The company’s cryptocurrency trading revenue saw an extraordinary increase of over 700% compared to the previous year, while equities and options trading showed strong growth of 144% and 83% respectively.
The company’s net revenue for 2024 reached $2.95 billion, marking a 58% increase from the previous year. This growth was accompanied by substantial margin expansion, with net income rising to $916 million in the fourth quarter alone.
Gold Subscription
Robinhood’s Gold subscription service, which charges users $5 monthly, has emerged as a key growth driver. The service ended 2024 with 2.64 million subscribers, representing an 86% increase year-over-year and a 21% rise from the previous quarter.
Gold subscribers have proven particularly valuable for the company, holding six times more assets under custody compared to regular users. They are also four times more likely to use Robinhood’s retirement account services.
The company’s assets under custody (AUC) reached $193 billion by the end of 2024, nearly doubling from $103 billion in the previous year. The fourth quarter alone saw record net deposits of $16.1 billion.
Crypto
Cryptocurrency trading played a major role in the company’s success, with volumes increasing by 455% year-over-year. This surge was partially attributed to market optimism following Donald Trump’s election victory and expectations of crypto-friendly policies.
For the first time since going public, Robinhood achieved a full-year GAAP profit, posting $1.4 billion for 2024. This milestone represents four consecutive quarters of profitability.
The company continues to expand its platform offerings with Robinhood Legend, a desktop platform designed for active traders. Plans are also underway to introduce index options and futures trading.
Robinhood briefly ventured into event contracts, offering Super Bowl-related prediction markets before the CFTC requested their removal. The company plans to work with regulators to launch a more comprehensive event contracts platform later this year.
The stock currently trades at 38 times projected earnings, a valuation that some analysts consider expensive for conservative investors.
Despite the recent downgrade, Robinhood maintains its focus on platform expansion and international growth, particularly in the Asia-Pacific region.
The company’s transformation from a mobile-first trading app to a comprehensive financial services provider continues to evolve, with management expressing optimism about future growth prospects.
Wolfe Research analysts noted that since their June upgrade, key drivers supporting their bullish case have largely materialized and are now reflected in the current valuation.
