Robinhood Markets Grows Into 'Best-In-Class' Brokerage, Analyst Says

Erica Kollmann

December 06, 2024

Analysts have updated coverage and raised price targets on Robinhood Markets, Inc. (NASDAQ:HOOD) after the company hosted its first investor day on Wednesday and showed significant growth across customers, assets under custody and trading volumes.

Expert Ideas: Goldman Sachs analyst James Yaro assumed coverage of Robinhood Markets on Thursday and upgraded the stock from Neutral to Buy with a $46 price target. The analyst highlighted the firm's growth as driven by continued wallet share gains among active traders and sees a long-term opportunity for Robinhood to expand into other areas, including wealth management and international markets.

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"HOOD has successfully migrated from a fast growing, periodically profitable online broker servicing mostly younger investors, to a best-in-class top and bottom-line asset under custody compounder with a growing total addressable market," Yaro wrote.

Robinhood's average revenue per user (ARPU) has more than doubled over the past two years and Yaro sees the firm's ARPU rising another 19% through 2026, driven mainly from transaction revenue growth.

The Goldman Sachs analyst also sees further growth of assets under custody (AUC), driven by Robinhood's low brokerage market share at present and its expanding wallet share among active traders. Yaro highlighted the "best-in-class customer value" provided through the company's HOOD Gold offering, as well as new products for active traders including index options, futures, crypto offerings and prediction markets.

Piper Sandler analyst Patrick Moley also weighed in on the potential for Robinhood to grow its assets under custody. In a Thursday note, Moley pointed to Robinhood's younger demographic, with 75% of its customers under age 43 combined with an ongoing generational wealth transfer of approximately $85 trillion, providing fuel for significant AUC and revenue growth.

Piper Sandler maintained its Overweight rating on Robinhood shares and raised its price target from $42 to $54.

HOOD Price Action: According to data from Benzinga Pro, Robinhood Markets shares ended Friday's session 7.07% higher at $41.67.

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