The Bullish and Bearish Case for Robinhood Still Comes Down to Crypto

  • HOOD stock is down 82.5% from its 52-week high as active users are down 
  • The company’s new cash card may stoke demand for crypto trading 
  • Trading at around $14, Robinhood may be an opportunity for patient investors 
A magnifying glass zooms in on the website for Robinhood (HOOD).

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Robinhood Markets (NASDAQ:HOOD) is down 82.5% from its 52-week high. One reason being cited for the dip in the company’s stock price is that active users on the platform are down. 

That may be true, although the app still has 22.5 million users. What’s bedeviling Robinhood is something more fundamental. Cryptocurrency buyers have been in hibernation during this crypto winter. New investors buying and trading crypto was a key driver of growth on Hood’s trading platform. And if HOOD stock is to recover, these are the users that will lead the way.  

But will they? The company’s own revenue estimates give the bears some ammunition. On its last earnings call, Robinhood gave a forecast for $340 million for the first quarter.  

Analysts didn’t love that. In the days after the earnings report, six analysts lowered their price targets for HOOD stock. The consensus price target shows a $110% upside. However, this is one of those times where you have to look below the surface. Robinhood is covered by 14 analysts. And that means the majority of them haven’t issued a new rating on the stock since the earnings report.

On the other hand, the company says that many users that abandoned the platform are looking to come back. Some of them may be returning because of the company’s new products. And with some evidence that the crypto winter may be coming to an end, the bulls may begin to build a case.  

HOOD Robinhood Markets $14.82

Encouraging Crypto Adoption One Cup at a Time 

One way that Robinhood is trying to attract new — and perhaps former — users is with a new debit card offering. The Robinhood Cash Card allows users to round up their change as a way to invest in assets of their choice. And Robinhood’s cash card also gives users a weekly bonus. This gives users extra incentive to use the platform and supports their investing goals. 

The idea of a cash-back card is not a new idea. What is different is that in addition to stocks, users can convert their cash back into cryptocurrency. Robinhood is specifically targeting Generation Z. And that generation seems more accepting of cryptocurrency, which makes it easy to see why the cash card may be a game changing idea. They can buy crypto along with their morning cup of coffee.  

At this time, Robinhood only supports a small list of cryptocurrencies. However, the list is bigger than that of PayPal (NASDAQ:PYPL) affiliate Venmo. In fact, Robinhood’s support of Dogecoin (CCC:DOGE-USD) was a key reason why HOOD stock achieved meme stock status. Robinhood says it continues to look for opportunities to add cryptos to its platform, but it is following the lead of regulators. 

HOOD Stock May Be an Opportunistic Buy 

Robinhood went public after the platform briefly stopped allowing users to buy GameStop (NYSE:GME) stock. This created negative publicity for the company. So, that doesn’t completely explain the drop in revenue between the first two quarters the company went public. 

I believe that had more to do with the end of stimulus payments and the beginning of users going back to work following Covid-19 shutdowns.

However, although HOOD stock dropped a little in the last quarter, it is basically stabilizing and so is the stock. And with crypto prices beginning to rise again, now may be the time for opportunistic investors to take a small position in the stock.  

On the date of publication, Chris Markoch 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 Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

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