Robinhood Markets HOOD is set to release its first-quarter 2025 results tomorrow after the market closes.
Robinhood’s fourth-quarter performance was impressive. Results benefited from the crypto-trading boom, higher net interest income (NII) and a jump in Gold subscribers. These drove the company’s top line.
Robinhood has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and lagged once, with the average beat being 80.75%.
Earnings Surprise
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The Zacks Consensus Estimate for quarterly sales of $898.60 million suggests a 45.4% improvement on a year-over-year basis. In the past week, the consensus estimate for earnings has been revised 3% lower to 32 cents. Nonetheless, this indicates a jump of 77.8% from the prior year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
HOOD’s Earnings Estimates
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Is it the right time to add HOOD stock to your portfolio? Let’s analyze the factors that are likely to have influenced its performance this time.
Factors to Note & Estimates for HOOD’s Q1 Results
Revenues: During the first quarter, client activity was robust, driven by heightened volatility and tariff policy concerns. Thus, Robinhood’s transaction revenues are expected to have soared like those of its peers, Interactive Brokers IBKR and Charles Schwab SCHW.
Interactive Brokers, which released its first-quarter results on April 15, witnessed a 35.6% year-over-year jump in commissions. Further, Schwab, which announced quarterly numbers on April 17, recorded 11.1% growth in trading revenues.
The Zacks Consensus Estimate for HOOD’s transaction-based revenues is pegged at $547.7 million, indicating a 66.5% jump from the prior-year quarter. This is likely to have been driven by higher options, equity, and cryptocurrencies transaction revenues.
The consensus estimate for options transaction revenues is $229.8 million, suggesting 49.2% growth. Further, the Zacks Consensus Estimate for equity and cryptocurrencies transaction revenues is pegged at $60.3 million and $264.1 million, respectively. Equity transaction revenues are projected to surge 54.6%, while cryptocurrencies transaction revenues are estimated to jump 109.6% year over year.
Further, relatively higher interest rates are expected to have supported Robinhood’s NII in the to-be-reported quarter, given no rate cuts by the Federal Reserve amid inflation and tariff-related concerns. The consensus estimate for NII is $296.5 million, implying a 16.7% rise.
The Zacks Consensus Estimate for other revenues is pegged at $53.7 million, suggesting a 53.5% increase from the prior-year quarter.
Expenses: Total operating expenses are likely to have remained elevated as the company invests in key areas to enhance platform capabilities, drive product innovation, improve customer support, and build upon regulatory and compliance functions. Also, the pending acquisition of Bitstamp is likely to have incurred some restructuring/merger-related charges during the quarter.
What Our Model Unveils for Robinhood Stock
Our quantitative model does not conclusively predict an earnings beat for Robinhood this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here, as you can see below.
Earnings ESP: Robinhood has an Earnings ESP of -3.01%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: It carries a Zacks Rank #4 (Sell) at present.
You can see the complete list of today’s Zacks #1 Rank stocks here.
HOOD Stock Price Performance & Valuation
Robinhood shares have had a remarkable run on the bourses since the beginning of the year. In the first quarter of 2024, the stock rose 13.2% against the industry’s decline of 1.3%. Further, it fared better than Schwab’s rise of 4.9% and Interactive Brokers’ decline of 2% during the same period.
First-Quarter 2025 Price Performance
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Now, let’s look at the value Robinhood offers investors at current levels.
Currently, HOOD is trading at 5.73X 12-month trailing price/tangible book (P/TB), above its three-year median of 1.46X. Meanwhile, the industry’s P/TB TTM multiple is 2.62. Hence, the stock looks expensive compared with the industry average.
HOOD P/TB TTM
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Investment Thesis for Robinhood
Robinhood is on the right path to expand or diversify its operations. Given the volatility in the stock markets because of several macroeconomic challenges, the company is expected to benefit from rising trading volume. However, tariff-related headwinds, including economic slowdown, may result in a modest rise in trading activities going forward.
Nonetheless, HOOD’s initiatives to keep adding new products and services and its plans to become a global entity by venturing across Europe and the Asia Pacific regions, organically and through buyouts, align with its expansion efforts.
Robinhood’s plans to focus on the cryptocurrency space through increased tokenization, enhanced capabilities and expansion into the EU markets will lead to further cost efficiency.
Also, in May 2024, Robinhood announced a share buyback plan, authorizing the repurchase of up to $1 billion worth of shares. While the plan doesn’t have an expiration date, the company expects to buy back shares in two to three years. As of Dec. 31, 2024, roughly $743 million worth of authorization remained available for repurchase.
However, increased regulatory oversight is a concern, given the blurred distinction between gambling and trading in the prediction markets hub and other event contracts. Further, its foray into the banking industry amid intense competition keeps investors cautious about its success.
Is HOOD Stock a Buy Ahead of Q1 Earnings?
Robinhood’s efforts to diversify its offerings, heightened volatility, and its expansion efforts to grow market share through buyouts and organically bode well for its first-quarter results.
However, uncertainties regarding tariffs, inflationary pressure, increased regulatory oversight and intense competition in newly ventured spaces like banking keep investors cautious about the company’s growth.
Thus, investors must watch for management comments on how the company plans to navigate these challenges in an uncertain environment.
With the quarterly performance expected to be not-so-impressive, it is better to wait for the results and then decide whether HOOD stock is investable or not. For those who already own the stock, it is advisable to sell it and book profits before it is too late.
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