Robinhood Markets (NASDAQ:HOOD) shares fell nearly 3% pre-market today after Citi’s analysts downgraded the company to Sell from Neutral, adjusting their price target to $16 from $13.
According to the analysts, Robinhood’s strong performance in early 2024, with a 44% increase, correlates significantly with rising Bitcoin prices, which have seen about a 64% increase year-to-date. Despite this, crypto transactions only represent an estimated 13% of Robinhood’s Q1/24 revenue.
The analysts suggest that the stock’s valuation has surged beyond what its fundamentals would justify, even though recent improvements in trading activity, assets under custody, and deposit growth have led to higher forward estimates and price target. However, the analysts highlighted potential risks tied to a significant drop in Bitcoin prices, decreased retail activity, or broader market downturns given Robinhood’s current valuation levels, especially noting that Robinhood trades at a premium compared to Interactive Brokers when looking at adjusted EBITDA projections for 2025.