Sometimes, revolutionary businesses can experience growing pains. Such may be the case with zero-commission investing platform Robinhood (NASDAQ:HOOD), which has transformed modern trading but hasn’t rewarded HOOD stock holders with the results they probably hoped for.
Robinhood has been a favorite of Ark Invest’s Cathie Wood as well as Millennial and Generation Z traders. Moreover, it’s possible that Reddit users targeted Robinhood for a short squeeze at least once.
Yet, HOOD stock is clearly out of favor in early 2022. As we’ll discuss in a moment, the stock’s technical damage is undeniable.
Perhaps investors dumped their Robinhood shares because they weren’t impressed with the company’s fiscal data. Nevertheless, at least one prominent Wall Street expert envisions a potential rebound amid the persistent pessimism.
A Closer Look at HOOD Stock
Going back to the beginning, Robinhood priced its shares for the public at $38 on July 29, 2021.
Soon afterwards, on Aug. 4, HOOD stock topped out at $85. It’s likely that meme-stock traders were at least partially responsible for this wild rally.
As you may have noticed, stocks that peak early can crash hard. Such was the case as the Robinhood share price declined for the remainder of 2021.
By late February 2022, HOOD stock was down to $10 and change. The billion-dollar question, then, is whether the stock is now a toxic asset or an irresistible bargain.
The damage has been done, and there are no meaningful support levels to speak of here. Hopefully, a turnaround is imminent as Robinhood’s remaining shareholders might capitulate if the situation doesn’t improve soon.
The Numbers Tell the Tale
Does Robinhood have a fighting chance of winning investors back? To help answer that question, we can examine the data — but as it turns out, the data paints a mixed picture.
During 2021’s fourth quarter, Robinhood posted $363 million in revenue, up 14% year-over-year. Plus, the company’s Q4 2021 transaction-based revenue increased 12% to $264 million.
So far, we’re off to a pretty good start. A notable highlight in 2021’s fourth quarter was Robinhood’s cryptocurrency-transaction revenue, which ramped up 304% year-over-year to $48 million.
The company’s bottom-line results were problematic, though. Robinhood incurred a net earnings loss of $423 million (49 cents per share) in Q4 2021, missing analysts’ expectation of a $225 million loss (35 cents per share).
Another disappointing statistic is that Robinhood’s monthly active users declined from 18.9 million in 2021’s third quarter, to 17.3 million in the fourth quarter. That’s not a gigantic drop-off, but the shareholders may have wanted to see Robinhood demonstrate faster growth in its user base.
Seeing the Glass as Half-Full
Even with a fiscal picture that’s mixed and perhaps somewhat disappointing, at least one analyst apparently has high hopes for Robinhood.
Mizuho (NYSE:MFG) analyst Dan Dolev reiterated his “buy” rating on HOOD stock, while issuing a price target of $19. Dolev cited Robinhood’s diminishing “rate of decline” in its monthly active users, as well as a notable increase in Robinhood’s “resurrected accounts” (accounts held by users who had previously closed them).
It’s interesting to observe how Dolev identifies reasons to see the proverbial glass as half-full. In another example of this, Dolev observed that Robinhood’s fourth-quarter 2021 average revenue per user (ARPU), at $64, “remained consistent” on a sequential basis.
This metric, evidently, is significant to the Mizuho analyst. A “major drag” on HOOD stock “in prior quarters has been steep declines in ARPU” and he posited that: “here, it is nice to see ARPU stabilize in 4Q in the mid-$60s.”
The Bottom Line on HOOD Stock
It’s nice to consider the possibility that Robinhood will finally turn a corner soon. Whether the share price will achieve Dolev’s $19 price target remains to be seen, though.
Going forward, Robinhood’s investors should pay close attention to the company’s bottom-line results. Narrowing the company’s net earnings loss would help to inspire confidence among the shareholders.
Overall, Robinhood’s results have been mixed, so it’s understandable if you have mixed feelings about the company. Nevertheless, if Dolev can find reasons to lean bullish on Robinhood, maybe you can, too.
On the date of publication, David Moadel 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.
