From a cursory look at the statistics, financial services firm Robinhood (NASDAQ:HOOD) — known for its gamified trading app — seems an idea from which to exit quickly. Last Friday, HOOD dropped more than 6% in equity value. In the past month (under wildly choppy conditions), Robinhood stock suffered a near 10% loss.
At the same time, the company posted some record-setting metrics for its most recent first-quarter 2024 earnings report. Further, retail investors are continuing to take control of their portfolios, meaning that the meme-trade phenomenon that materialized during the depths of the Covid-19 crisis was no fluke.
That should be quite positive for Robinhood stock. So, why the volatility? It could simply come down to a distraction from the cryptocurrency space. For those with a long-term time horizon, HOOD appears to be a lucrative buying opportunity.
Crypto Jitters Impact Robinhood Stock
Arguably, in any other circumstance, there would be little chance that Robinhood stock collapsed the way it did last week. When the closing bell rang out last Friday, HOOD found itself down just under 8% in the trailing five sessions. That’s despite some encouraging data.
Last Wednesday, the financial technology (fintech) specialist reported net income of $157 million or 18 cents per share in Q1. That represented a dramatic swing from the year-ago quarter’s result of a net loss of $511 million or 57 cents per share. Analysts had expected earnings per share of 6 cents.
On the top line, management posted sales of $618 million. That handily beat the consensus target of $549 million. Further, the company stated that both metrics represented corporate records. Intuitively, Robinhood stock popped more than 5% during the afterhours session, per CNBC.
Unfortunately, HOOD’s robust return was short lived. After a gap-up move on Thursday morning, Robinhood stock began tumbling badly. The red ink likely stemmed from the crypto market, which had been fading for the past few days. On Friday, the sector suffered a sizable drop that also took down Coinbase (NASDAQ:COIN).
Another reason why crypto rumblings appears to be the culprit for HOOD stock’s seemingly contradictory trading is the ecosystem’s rising importance. Blockchain-related transactions accounted for $126 million in Q1 sales. In addition, regulatory matters cloud the forward viability of this business.
Still, these might be temporary issues. For one thing, crypto giveth and it taketh away. A bad day can easily turn into a series of lifechanging returns. As for the regulatory battle, with people and enterprises interlocked in a convoluted web, one agency might not be enough to spark substantive change.
Retail Investors Are Moving In
Let’s step aside from the “damage control” segment of Robinhood stock and move toward the accretive arguments. Fundamentally, a key reason why HOOD appears compelling is the sentiment of retail investors. Essentially, they’re moving back into the market and taking control of their portfolios.
While the urgency of the meme trade phenomenon has significantly faded, it has metamorphosed into a more sustainable trend: people, especially from the younger demographics, are more interested than ever in investing. What’s more, a harsh reality will likely accelerate retail investing, which is tremendously positive for Robinhood stock.
Basically, the American Dream is dead in the traditional sense. That is, the idea of staying loyal to one company for an entire career is almost nonsensical. Further, the concept of “hustling” (or working super hard) to bring value to the table and thus accelerating up the corporate ladder is also extremely problematic.
With inflation and interest rates sky high compared to pre-pandemic norms, achieving the American Dream is impossible; that is, unless you decide to speculate. That’s part of the reason why cryptos are so popular. It’s highly speculative and if the stars align, the dream is possible.
As well, innovations such as artificial intelligence is helping retail investors take control of their investing tactics and strategies. This dynamic will probably only accelerate public participation, making Robinhood stock an intriguing, discounted opportunity.
The Takeaway: It’s Risky but There’s Potential Upside Here
Without doubt, Robinhood stock presents high risks. Not only did shares decline sharply last Friday, analysts rate shares a consensus hold. In the past three months, three experts pegged HOOD a sell. Nevertheless, the volatility presents a possible upside opportunity for patient investors. More people are participating in the market and with speculation being one of the few mechanisms for life success, the fintech firm stands on cynically viable ground.
On the date of publication, Josh Enomoto 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.
