Robinhood Shares Surge, Fueled by Crypto Bounce and “Risk-On” Market Sentiment
Robinhood Markets, Inc. (HOOD) shares experienced a significant jump on Friday, closing 14% higher at $82.82. The increase came amidst substantial trading volume, exceeding recent averages. This rally follows a four-week period during which the stock had lost 37% of its value.
The surge coincided with a rebound in cryptocurrency prices and a broader shift in market sentiment towards “risk-on” investments, according to Zacks Equity Research. Robinhood’s business model is closely tied to retail trading activity and the performance of cryptocurrencies, meaning investor confidence often translates into increased engagement and transaction revenue.
Analysts anticipate Robinhood will report quarterly earnings of $0.62 per share in its upcoming earnings release, representing a year-over-year increase of 14.8%. Revenue is projected to reach $1.32 billion, a 30.5% increase compared to the same quarter last year.
While earnings and revenue growth are important indicators of a stock’s potential, trends in earnings estimate revisions are strongly correlated with short-term price movements. In the last 30 days, the consensus earnings per share (EPS) estimate for Robinhood has been revised upward by 5%, a positive signal that often precedes price appreciation.
Currently, Robinhood holds a Zacks Rank #3 (Hold).
In comparison, BGC Group (BGC), a peer in the Zacks Financial – Investment Bank industry, saw a more modest increase, finishing the last trading session 1% higher at $8.96. BGC has returned 0.6% over the past month.
However, BGC Group’s consensus EPS estimate has been revised downward by 5.4% over the past month, to $0.29. This represents a year-over-year increase of 16%. BGC Group currently carries a Zacks Rank of #4 (Sell).
The recent performance of Robinhood follows a period of scrutiny for the company, stemming from its role during the GameStop short squeeze in January 2021. During that event, Robinhood restricted trading in GameStop and other volatile stocks, sparking controversy and accusations of market manipulation. The surge in GameStop’s price was largely driven by retail investors coordinating on the Reddit forum r/wallstreetbets, attempting to capitalize on heavily shorted positions held by hedge funds.
Approximately 140 percent of GameStop’s public float had been sold short at the time, and the resulting buying pressure drove the stock price to a pre-market high of over $500 per share – nearly 30 times its valuation at the beginning of the month. The incident led to dozens of class action lawsuits against Robinhood and a congressional hearing before the U.S. House Committee on Financial Services.
