Robinhood Share Price Forecast August 2021 – Time to Buy HOOD Shares?
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Shares of American financial services company Robinhood (NASDAQ: HOOD) have soared again on Wednesday, August 4th, extending a rally in the shares after trading was halted for volatility several times. HOOD shares closed up 50.4% at $70.39, which equalled a weekly gain of more than 100%. This has led to investors showing interest in the shares recently. It has led to many comparing it rallies staged by GameStop, AMC and other so-called meme stocks earlier this year.
Robinhood Shares – Technical Analysis
Robinhood released its financial statement which indicated that its market cap is $59.121 billion with total assets worth $12.104 billion. The company indicated that its revenue for 2020 was at $958.83 million compared to $277.53 million in 2019.
Robinhood recently debuted in Nasdaq after which it had a dismal performance. It opened at $38 per share initially but subsequently fell 8% on its first day and had largely traded below that level. This was until Tuesday when the shares rallied more than 24%. On Wednesday the shares surpassed their IPO debut volume of 10.2 million shares, rising up to 104.6 million shares.
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Robinhood Shares Recent Development
As mentioned before, Robinhood had a lacklustre NASDAQ debut, falling to $34.82 in the final hours of trading. The company and its bankers priced the shares at the bottom of its targeted range in an effort to avoid poor first-day performance. A good debut performance was needed for Robinhood as it sold a large proportion of its shares to its own customers, which accounted for almost 20% to 25% of the company’s offerings.
However, sentiment surrounding the shares reversed this week, with more than 172 million HOOD shares changing hands on Wednesday. According to DowJones Market data, this made the company the second most actively traded stock in the U.S. The participation of retail investors also took off in the past couple of sessions after the disappointing debut. They accounted for the purchase of $19.4 million worth of Robinhood shares on Tuesday. This made them the sixth most purchased shares and the 11th most traded security on retail platforms.
As total retail volume surged about 10 times on Tuesday, trader chatrooms such as those in Reddit, Twitter and StockTwits started seeing increasing mentions of Robinhood’s performance. This boost also coincided with Ark Investment Management’s decision to increase its stake in the company. Ark bought 89622 HOOD shares in the previous session.
Should You Buy HOOD Shares?
While Robinhood’s businesses are growing rapidly, investors may have to keep a close eye on this. For instance, options trading accounted for more than 46% of Robinhood’s PFOF revenue. It is said that the majority of options traders lose money over time. If such is the case with Robinhood users, they can move away from its service which will not be good for Robinhood’s long-term prospects. The company has also seen a growth in cryptocurrency-based revenue, with 34% of it coming from Dogecoin. Robinhood relies on overall investor sentiment for cryptocurrency which makes it unclear whether this revenue stream will be sustained in the future.
Robinhood is expected to grow quickly with the sales multiple slated to compress over the next few years if it can keep up its 3-digit revenue growth. However, investors have to ask two important questions: How sustainable is the revenue flow and what type of profit margins can the company achieve. Investors should consider the company’s high costs and reliance on its options and cryptocurrency trading business. While it’s growing quickly, the above reasons make HOOD shares risky for investors at the moment.
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