Truist Securities (TFC) has begun covering investing platform Robinhood (HOOD) with a Buy rating and $155 price target. Interestingly, four-star analyst David Smith explained that Robinhood’s steady stream of new features and updates is helping the company grow its customer base and appeal to higher-net-worth users. As a result, this broader reach is driving stronger performance in key areas, such as user growth and market share.
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Smith also noted that Robinhood’s growth is supported by efficient scale, which means that the company can grow while improving its profit margins. As profitability improves, Robinhood will have more flexibility to reinvest in its business by either building new products or making acquisitions. Therefore, Truist expects Robinhood to post over 50% revenue growth for the second straight year, and believes 20% annual growth could be achievable in the years ahead, even as the company grows larger.
Moreover, although Robinhood shares have already jumped by about 220% this year (far outpacing the S&P 500’s 16% gain), Truist believes that the stock’s high valuation is justified by its mix of strong growth and improving profitability. For context, Robinhood stock currently trades at a price-to-earnings ratio of almost 50.
Is HOOD a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on HOOD stock based on 14 Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average HOOD price target of $148.74 per share implies 24.6% upside potential.
