Evercore ISI sees 19% upside in Robinhood. Is the stock worth buying?
Robinhood has significantly underperformed the S&P 500 this year
Evercore ISI has initiated on Robinhood at "outperform" / Photo: Shutterstock.com / NRSPro
Evercore ISI has initiated coverage of trading platform Robinhood at "outperform," CNBC reports. Its optimism centers on the company’s ability to develop and monetize new products, grow customer deposits, and expand promising business lines. It believes this track record will allow Robinhood to increase revenue and sustain its premium valuation.
Details
Evercore initiated coverage of Robinhood on Monday with an “outperform” rating at a target price of $130 per share, implying 19% upside from the close on Friday.
“If you build the flywheel... they will come,” Evercore ISI analyst Adam Frisch wrote in a Monday note to clients quoted by CNBC. In his view, Robinhood has successfully developed new products and turned them into revenue streams. The company aims to become a one-stop shop for financial services for its existing customers and can readily accommodate a more affluent customer base with its broad range of tools and intuitive interface, Frisch wrote.
The company has taken several steps to mitigate headwinds weighing on its business growth. In particular, Robinhood is reducing its reliance on interest spreads earned on customers’ cash balances, while its pricing is at or close to the best in the industry, Frisch noted.
The Evercore analyst sees further potential in new business lines, including prediction markets and the Chain blockchain project. Robinhood has already brought 13 products to $100 million in annual revenue. This track record, he believes, demonstrates the company’s ability to launch new offerings successfully and attract customers to them. “we believe the story will continue to be able to carry its premium valuation over the next several years,” Frisch notes.
Stock performance
Evercore ISI’s recommendation aligns with the prevailing view on Wall Street. According to MarketWatch data, 35 analysts cover Robinhood: the stock has 28 “buy” calls versus five “hold” and two “sell” ratings. Three months ago, it had 23 “buy” recommendations and six neutral ratings, while the number of “sell” calls was the same at two. The average analyst target price for Robinhood is $138 per share, implying 27% upside from the Friday close.
Robinhood shares were off 0.75% during trading on Monday to bring their year-to-date decline to around 4%. By comparison, the broad-market S&P 500 index has gained 14% since the beginning of the year.
