Why Robinhood Stock Is Soaring: A Buying Opportunity?

Robinhood Markets, Inc. HOOD stock surged 12.8% on Monday after launching new crypto offerings for European and U.S. users. The trading platform’s shares have now spiked more than 300% in the past year, raising thoughts of a buying opportunity. Let’s find out –  

Here’s Why Robinhood Stock Is Surging 

Robinhood aims to become a comprehensive financial services company, not just a hub for meme stock traders. Crypto is expected to play a key role in achieving this goal. Robinhood is adding more than 200 U.S. stocks and ETF tokens, including Apple Inc. AAPL and NVIDIA Corporation NVDA, to its platform in the EU to give European users access to American equities.  

Tokenized stocks, popular among crypto enthusiasts, mimic underlying equities but utilize blockchain technology instead of traditional exchanges. Additionally, EU customers will have access to crypto perpetual futures for leveraged exposure to volatile assets. The company plans to introduce this product in the United States if crypto futures receive approval from the CFTC.  

Robinhood also launched crypto staking for U.S. users to expand its offerings and compete with crypto-native exchanges, such as Coinbase Global, Inc. COIN. This feature will also be available to customers in the EU and the European Economic Area. Driven by these developments, Robinhood’s shares have risen. 

More Reasons to Be Bullish on Robinhood Stock 

To tap into the booming cryptocurrency market, Robinhood acquired a cryptocurrency exchange, Bitstamp, for $200 million. This has enabled Robinhood to combine its cryptocurrency, options, and equities trading capabilities, establishing its status as an innovator in the finance field, which will boost the company’s future valuations.  

Additionally, trade tariffs led to increased volatility in the S&P 500, causing a rise in trading activity. These higher trading volumes improved Robinhood’s first-quarter results, with revenues jumping 50% year over year to $927 million and earnings per share reaching 37 cents, up 106% year over year. The company’s management also announced that they have seen strong customer engagement in the second quarter. 

Is Now the Time to Buy HOOD Stock? 

Increased customer engagement, Bitstamp acquisition, tokenized trading launch in the EU, and expanded crypto offerings are acting as tailwinds for Robinhood stock. In reality, Robinhood has a higher net profit margin of 48.8% than the Financial - Investment Bank industry’s 16.1%, indicating strong growth potential.  

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Shares of Robinhood are currently trading above both the short-term 50-day moving average (DMA) and the long-term 200 DMA, further indicating a positive trend. Therefore, stakeholders are advised to retain their shares.  

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Robinhood, however, is currently trading at a fairly hefty valuation. Per the price-to-earnings (P/E) ratio, Robinhood trades at 76.12 times forward earnings, while the industry’s forward earnings multiple is 15.44. So, new buyers should be cautious because any lack of growth could lead to a major correction in Robinhood stock.  

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For now, Robinhood stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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