The key question for trading platform Robinhood (HOOD) is how long the recent acceleration in retail trading will last, broker KBW said in a research report that initiated coverage of the stock with a market perform rating and a $20 price target.
KBW notes that retail engagement materially ramped up in the first quarter, helping drive the share price up 150% in only four months.
If there is continued strength in retail stocks and cryptocurrency prices, the acceleration in retail engagement could continue and may even increase, the report published Tuesday said.
Still, the stock price has already “adequately captured the baseline upside” from new product launches and has started to “price in a higher level of normalized retail trading activity,” analysts led by Kyle Voigt wrote.
Retail activity is expected to moderate from the levels seen in the first quarter and gradually decline into 2025, the note said.
The U.S. self-directed brokerage industry is one of the quickest growing sectors of the broader U.S. wealth market, and “Robinhood is positioned as a small (but quickly growing) player in a secularly growing industry,” the report added.
“With Robinhood only having ~1% share of U.S. self-directed assets, but ~20% share of estimated total U.S. self-direct brokerage accounts, we believe there is room for HOOD to outpace the overall asset growth in the self-directed industry as its core client cohort matures,” the authors wrote.
Robinhood shares closed at $19.20 on Tuesday, and have gained over 50% year-to-date.
