TLDR:

Robinhood stock has jumped 60% in the past six months, reaching $40.80 per share
The company showed impressive 43.9% growth in average revenue per user (ARPU) over two years
Earnings per share (EPS) flipped from negative to positive, marking a financial turning point
Free cash flow margin has improved, making it a less capital-intensive business
Jim Cramer likes Robinhood but warns of potential 15-20% downside before bottoming

Robinhood’s stock has been on a remarkable journey, surging 60% over the past six months to reach $40.80 per share. The trading platform, known for its commission-free stock and crypto trading, has captured attention with its strong performance metrics and growing user base.

The company’s recent price increase comes on the heels of solid quarterly results. This run-up has investors wondering about their next move with the stock.

Robinhood Markets, Inc. (HOOD)

One key metric showing Robinhood’s strength is its average revenue per user (ARPU). This figure has grown by an impressive 43.9% over the last two years.

ARPU is particularly important as it reveals how much the company earns in fees from each user. It also provides insights into average transaction size and Robinhood’s take rate on transactions.

The growth in ARPU while simultaneously growing its funded customer base demonstrates the platform’s increasing value to users. Simply put, users are spending much more than they did last year.

Financial Turnaround

Another positive sign for Robinhood is its earnings per share (EPS) trajectory. The company’s full-year EPS has flipped from negative to positive over the last three years.

This transition marks a critical inflection point in Robinhood’s financial story. It signals that the company’s growth strategy is now delivering profits rather than just expanding its user base.

The company has also shown improvement in its free cash flow margin. This is a welcome development for investors concerned about capital efficiency.

The expanding margin suggests Robinhood has become a less capital-intensive business. Its free cash flow profitability has risen more than its operating profitability, though the trailing 12-month free cash flow margin was still negative at 7.1%.

Currently, after the recent rally, the stock trades at 22.4× forward EV-to-EBITDA.

Expert Opinion

Jim Cramer, host of Mad Money, recently shared his thoughts on Robinhood. While expressing that he likes the company “very much,” he also urged caution about buying at current prices.

During a recent episode, Cramer warned that the stock could see another 15-20% downside before bottoming out. His comments came in response to a caller asking for his opinion on the stock.

Cramer’s hesitation appears tied to broader market concerns. He has been vocal about market turmoil related to recent trade policies, particularly tariffs implemented under President Trump’s administration.

Hedge fund interest in Robinhood remains strong, with 79 hedge funds holding positions in the company as of the fourth quarter of 2024.

Artisan Partners highlighted Robinhood in their Q4 2024 investor letter, noting that it “has emerged as the go-to-trading platform for millennials, boasting approximately 25 million accounts (versus Charles Schwab’s 34 million).”

The investment firm pointed out that Robinhood’s user base skews younger, with deposits growing significantly faster than the broader industry. This growth is driven by the rise of self-directed trading, generational wealth transfer to millennials, and increasing market share.

As Robinhood’s customer base matures and accumulates wealth, many analysts believe the company is well-positioned to expand its product offerings to meet evolving financial needs.

Management’s focus on profitable growth and a 90% fixed cost structure suggests meaningful margin expansion potential, according to Artisan Partners.

The company continues to pursue its mission of democratizing finance through its online consumer platform. Its features include fractional trading, margin investing, and educational resources.

Robinhood also provides access to tools such as credit cards, spending accounts, and wallets, giving users a comprehensive financial ecosystem.

Despite the positive outlook from some quarters, investors should weigh Cramer’s warning about short-term downside risk against the company’s long-term growth potential.

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

For those considering an investment in Robinhood, the current price point demands careful consideration of both the company’s strong growth metrics and the potential for near-term market volatility.

The post Robinhood (HOOD) Stock: Is The Trading App’s 60% Price Jump Just The Beginning? appeared first on CoinCentral.

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Filed under: News - @ April 10, 2025 12:29 pm