Robinhood Markets Inc. shares are heading for their worst week since August as they pull back from the crypto-fueled surge that followed the election of President Donald Trump.
The stock is on track for a 14% weekly decline, after dropping as much as 17%.
The trading platform reported blowout fourth-quarter earnings on Feb. 12 that showed revenue more than doubling, helping the shares cap off a 162% rally since Trump’s election on Nov. 5 through the end of last week. Analysts at both Citigroup Inc. and Wolfe Research LLC wrote after the report that they thought the stock was pricing in much of the company’s earnings growth potential, with Wolfe’s Steven Chubak downgrading it to a hold-equivalent from buy.
“We had recommended to our clients that they should take some chips off the table” at a $60 to $70 share price, Chubak said. The downgrade was a wake-up call to investors to be “a bit more forensic” over the company’s potential.
Robinhood’s crypto-currency revenue grew more than 700% in the fourth quarter, a period during which the price of Bitcoin topped $100,000 on hopes that Trump would favor digital assets.
Mizuho analyst Dan Dolev wrote in an email that the pullback was fueled by fears that the “animal spirits” the company saw in the fourth quarter won’t last. He’s still positive on the stock, expecting continued tailwinds from digital assets and growth in the trading platform’s user base.
Dolev is far from alone in his bullish view. Almost three-quarters of analysts tracked by Bloomberg rate the shares a buy, and their average 12-month price target is $70.76—just above the 2021 record high.
Still, a rebound isn’t guaranteed, said Chubak. He noted that industry data shows a decline in crypto activity so far this quarter.
“It wouldn’t surprise me if, in a softer activity backdrop for crypto, this stock were to continue to trade lower,” Chubak said.
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