Robinhood Stock Price Forecast November 2021 – Time to Buy HOOD Stock?

Popular retail trading app Robinhood (HOOD), which listed this year only, is having a turbulent ride. It hit a record low on Friday and now trades at almost a third of its all-time highs. What’s the forecast for the stock and is it a good buy now?

Robinhood joined the list of meme stocks shortly after its listing. Notably, while the stock had a dismal listing and fell below the issue price, it soon saw buying interest from retail as well as institutional investors. Cathie Wood of Ark invest was among the fund managers who put their weight behind Robinhood. Notably, she bought Coinbase stock also after it plummeted after the initial surge following its direct listing.

Robinhood’s earnings were a disappointment

Robinhood released its third-quarter earnings last month which were a big disappointment. It reported revenues of $365 million, which was below the $431 million that analysts were expecting. Also, it reported a per-share loss of $2.06 which was wider than the $1.27 that analysts were expecting.

If the financial performance wasn’t bad enough, the operating metrics were even worrisome. The net cumulative accounts on the platform dropped to 22.4 million from $22.5 million in the second quarter. While the company added new accounts in the quarter, it was more than offset due to higher attrition. The average revenue per user was $65 in the quarter, which was 36% lower than what the company had reported in the corresponding quarter last year.

68% of all retail investor accounts lose money when trading CFDs with this provider.

The dogecoin connection

HOOD’s transaction-based revenue fell to $267 million in the quarter. Crypto trading accounted for only $51 of the total transaction-based revenues in the quarter. Notably, in the second quarter, crypto accounted for over half of Robinhood’s transaction-based revenues. Within cryptos, dogecoin was the majority contributor. However, as the fortunes of dogecoin fell, so did the revenues of Robinhood. Notably, HOOD only has a handful of cryptos on the platform. Several Shiba Inu fans lobbied in favor of Robinhood adding the meme crypto but the company did not oblige.

Meanwhile, the third-quarter earnings report highlights the importance of too much dependency on one crypto, and that too a meme cryptocurrency. “Q2 was kind of one of those idiosyncratic market events where there’s this massive interest specifically in doge,” aid Robinhood CFO, Jason Warnick.

HOOD guidance

He added, “We love it when those moments happen. It’s a great way to bring a lot of new customers onto the platform. But we’re really thinking about investing in crypto over the long term. And so it’s you know, frankly, it’s gonna be impossible for us to accurately predict … revenue on a quarter-to-quarter basis.”

Meanwhile, Robinhood said that it expects its revenues in the fourth quarter to be below $325 million while the new account addition to be similar to the second quarter. Going by the company’s guidance, it would be the second consecutive quarter where HOOD’s revenues would fall on a quarterly basis.

Robinhood stock forecast

Wall Street analysts have a mixed forecast for HOOD stock. Of the 14 analysts covering the stock, six have a buy rating while seven have a hold rating. One analyst has a sell rating. Its median target price of $46 is a 58.6% upside over current prices. The street low target price of $26 is a discount of 10.3% while the street high target price of $84 is a 190% premium.

HOOD target price

Last week, Deutsche Bank advised investors to sell Robinhood stock. “We believe the meme stock phenomenon we witnessed en masse earlier in the year was more applicable to Robinhood’s recent customer growth and likely resulted in overestimation of the company’s core fundamentals and growth trajectory,” said Deutsche analyst Brian Bedell.

Notably, while several analysts lowered HOOD’s target price after the dismal third-quarter earnings, many like Mizuho reiterated their buy rating.

Robinhood stock long term forecast

Robinhood is working on several new products to increase its wallet share from existing investors. It is working on offering IRA and has a waitlist of 1 million for its crypto wallet. The company might eventually add more cryptos as well as services like staking and lending on the platform. However, the company said that it would be careful and wait for more regulatory clarity.

According to Bedell, “We believe HOOD’s share price performance over 12 months would be primarily driven by a ‘tug of war’ between investors embracing the company’s long-term growth potential upon product innovation and customer growth vs. investors that are concerned about nearer term challenges from expense growth creating profitability pressures, and slowing customer growth that would delay the firm’s revenue and earnings growth trajectory.”

Should you buy Robinhood stock?

Robinhood has to shed its image as a fun trading app if it has to offer more serious investing products like the IRA. It also needs to win back some of the customers that it has lost. In the first quarter, several retail traders were annoyed with the company after it blocked trading in meme stocks. More recently, a security breach has also done damage to its reputation.

HOOD stock is looking terrible on the charts after having fallen to a record low. It trades below all key moving averages. However, the stock now looks oversold and has a 14-day RSI (relative strength index) of 24x. RSI values below 30 indicate oversold positions.

Meanwhile, Robinhood’s valuation multiple has also come down and it now trades at an NTM (next-12 months) price-to-sales multiple of 13.6x. The company faces several challenges including the SEC’s scrutiny of order flow mechanism, from which HOOD gets most of its revenues.

That said, if Robinhood can get back to the growth trajectory, the current valuations would appear reasonable. However, if the trend of falling revenues and tepid user growth numbers continues, it might remain out of favor with markets.

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