Today brings one of the most-hyped initial public offerings of the year. Robinhood (NASDAQ:HOOD) will be trading on Wall Street for the first time ever this morning, and investors are unsure of how to feel. The trading platform matches its innovation in the e-trade space with a host of controversies which plague it to this day — and likely well into the future. As such, analysts are split down the middle on their Robinhood IPO attitudes.
What exactly are these experts saying, and should you buy HOOD stock?
Analysts Clash Over the Robinhood IPO
Ahead of the IPO, there is a fair amount of bullish sentiment, mostly coming from retail traders themselves. However, most analysts seem to be concerned with the public offering for a few reasons. As CNN Business reports, finance expert Reena Aggarwal finds the IPO’s unusual share allocation as a cause for concern; Robinhood will offer 35% of its Class A shares to retail investors, much more than a typical public offering. Aggarwal believes this will cause a lot of volatility headaches as HOOD stock reckons with its investor base’s “flipper” mentality.
Taylor Tepper and Benjamin Curry of Forbes take a relatively neutral stance on the Robinhood IPO. As they point out, it’s impossible to ignore the company’s revolutionizing of trading by removing fees and attracting an entirely new class of investors. Yet, they also mention the growing commodification of the market; competition is wising up and rolling out similar features. The pair say they have a hard time believing Robinhood can keep up its meteoric growth.
But if you think the company will keep up its current pace, you are looking at an easy buy… at least according to one pundit. CFA Mohit Oberoi writes that the stock could be a very lucrative investment if Robinhood can continue rolling out new products and keep other trading platforms playing catch-up. However, a slowing of this could set HOOD stock back.
HOOD Stock: Can the Company Continue to Grow?
Finance expert Peter Cohan has his doubts that Robinhood can continue innovating at its current pace. He also shares more concerns in coming regulations on the platform’s payment for order flow (PFOF) revenue model, which is the biggest generator of revenue for the company.
Cohan makes another bearish argument against the Robinhood IPO in the hefty fines it faces as a result of its treatment of users. The GameStop (NYSE:GME) fiasco saw investors literally prohibited from buying certain stocks. As a result, it is still being investigated by Congress over it. The company also just recently shelled out $70 million in fines relating to a separate trading outage in early 2020.
So, there’s a lot to think on when reviewing these opinions. The company has a track record of innovation, an aptitude for growing its users, and an impressive bloom in revenue. But, can it keep up this huge revenue increase? Will regulations hinder the company down the line? Will this new offering model come back to bite it if initial gains lead to large-scale profit-taking? Think about it before you buy your HOOD stock today.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.