What Happened?
Shares of financial services company Robinhood (NASDAQ:HOOD) jumped 6.9% in the morning session after Morgan Stanley analyst Michael J. Cyprys raised the stock's rating from Equal Weight (Hold) to Overweight (Buy) and increased the price target from $24 to $55 with the expectation that the company will benefit from the US elections amid hopes of deregulation. The new price target implied a potential 50% upside from where shares traded before the upgrade was announced. The analyst added, "Revenue growth looks stronger post-election on durable retail trading and more crypto support, M&A opening up, and animal spirits reviving... Execution on plans to broaden platform supports 15% top line CAGR to $4B in 2027."
After the initial pop the shares cooled down to $37.68, up 2.7% from previous close.
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What The Market Is Telling Us
Robinhood’s shares are extremely volatile and have had 31 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 14 days ago when the stock gained 12.1% as stocks linked to the cryptocurrency sector surged after Bitcoin surpassed $80,000, reaching a new all-time high. The improved sentiment echoes growing optimism that the Trump administration will adopt more supportive policies toward the crypto industry. This narrative earned even more credibility after The Republicans regained control of the Senate during the 2024 elections, implying more predictable and stable policies. With supportive policies, there could be increased adoption and integration of cryptocurrencies in mainstream financial systems.
Also, rising asset prices typically improve investor confidence, prompting traders and investors to increase their participation by placing new bets or engaging in more frequent trading. This heightened trading activity translates into higher transaction volumes and more revenues for trading platforms like Coinbase and Robinhood that earn fees on these trades.
Robinhood is up 204% since the beginning of the year, and at $37.68 per share, has set a new 52-week high. Investors who bought $1,000 worth of Robinhood’s shares at the IPO in July 2021 would now be looking at an investment worth $1,081.
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