Piper Sandler analyst Patrick Moley has indicated that the current volatile trading environment is poised to benefit exchange and trading companies, leading to a robust outlook for retail brokers. He has maintained an Overweight rating on Robinhood Markets Inc. (NASDAQ: HOOD) with a price target of $27.
Despite challenges from a lower interest rate environment affecting Net Interest Income, Moley identified several near-term opportunities for Robinhood that could support ongoing earnings growth. On October 16, the company will host an active trader summit in Miami, where it is expected to unveil a new web-based trading platform and announce the launch date for index options and futures trading for its 24 million users.
Moley anticipates that these new offerings will enhance trading activity among existing customers and that the pricing for index options and futures will be competitive compared to other platforms. He believes this strategy could help Robinhood capture market share in the high Average Revenue Per User (ARPU) segment, which constitutes nearly 50% of the retail market and where the company currently has no presence.
Looking ahead, Moley predicts that the fiscal third quarter of 2024 will be one of the strongest in Robinhood’s history in terms of revenue and adjusted EBITDA. He forecasts a 43% year-on-year increase in total revenues (<1% quarter-on-quarter), supported by growth across all major revenue lines. In particular, he expects crypto trading revenue to rise by 184% year-on-year, driven by substantial trading volumes and net deposit growth.
Moley also anticipates that higher interest rates and increased customer balances will contribute to a 20% year-on-year increase in Net Interest Income. His adjusted EPS estimate of $0.17 for the third quarter would mark the second-highest quarterly EPS for Robinhood since the second quarter of 2020.
In contrast, Moley reiterated a Neutral rating on Coinbase Global Inc. (NASDAQ: COIN) with a price target of $245. He projects that Coinbase will see an 88% year-on-year revenue increase to $1.27 billion in Q3, driven by rising transaction volumes and crypto prices. He expects transaction revenues to rise by 118% year-on-year, despite a slight decrease in fee capture.
As for recent stock performance, HOOD is up 8.25% at $25.25, while COIN has declined by 1.72% to $166.02.
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