Robinhood Stock (HOOD) Falls Sharply after S&P 500 Snub Ends Hype Rally

Robinhood shares (HOOD) fell sharply in premarket trading Monday, dropping as much as 5% after S&P Dow Jones Indices announced no changes to the S&P 500. The decision crushed recent speculation that the online brokerage was poised to join the benchmark index in the latest quarterly rebalance.

The stock had rallied aggressively in recent weeks, hitting its highest level since its 2021 IPO on Friday as investors leaned into the inclusion narrative. That narrative collapsed fast after Friday’s late announcement from S&P — and the price action followed suit.

By 8:45 a.m. ET on Monday, HOOD was trading down to $71.20, pulling back from a prior close of $74.88.

Analysts Had Fueled Robinhood’s Index Speculation

Earlier this month, Bank of America analysts called Robinhood “the prime candidate” for S&P 500 inclusion, pointing to its rebound in user growth, trading activity, and market cap momentum. That endorsement added fuel to the speculative run, helping the stock more than double year-to-date.

Robinhood’s market cap stood at $66.1 billion as of Friday — more than triple the $20.5 billion minimum required for S&P 500 entry. The company also checks other boxes: it’s U.S.-domiciled, trades on the Nasdaq, and has shown sustained profitability. Still, index inclusion is not automatic — and the S&P’s committee passed this round.

AppLovin Sinks Too as Hopes Fade

Robinhood wasn’t the only name hit by the decision. AppLovin (APP), another stock that rallied hard on inclusion rumors, fell 5% premarket to $397. Like HOOD, AppLovin had seen a surge in momentum over the past few weeks as traders tried to front-run index rebalancing.

The reaction shows just how much upside was already priced into the bet — and how quickly it can reverse.

Goldman Still Bullish on HOOD

Despite the hit, Goldman Sachs (GS) raised its price target on Robinhood to $81, up from $72, while reiterating a Buy rating. In a note to investors, Goldman cited “strong” preliminary May metrics, including higher trading volumes, rising margin balances, and continued momentum in assets under custody.

However, the firm did note that net deposits fell to $3.5 billion in May, down from $6.8 billion in April — a slowdown it attributed to the expiration of short-term promotional offers.

Coinbase Still Holds the Digital Finance Crown

The Robinhood reversal comes just one month after Coinbase (COIN) became the first crypto-native company ever added to the S&P 500, a milestone that signaled growing acceptance of digital finance within the Wall Street establishment.

That move sent a clear message to markets: legacy financial indexes are now open to fintech disruptors — if they meet the bar. With Robinhood’s surging market cap, user growth rebound, and recent profitability, many saw it as the next logical candidate.

But Friday’s decision reminded investors that index inclusion is as much discretionary as it is data-driven. While Robinhood checks the technical boxes — including being U.S.-listed, profitable, and valued above the $20.5 billion threshold — S&P’s committee opted to hold off. That hesitation is now being felt in the stock, as traders who front-ran the inclusion narrative are forced to unwind their positions in real time.

Is HOOD a Good Stock to Buy?

Despite Robinhood’s year-to-date rally and post-earnings strength, Wall Street’s average 12-month HOOD price target sits at just $63.28, according to data from 19 analysts — representing a 15.5% downside from the current price of $74.88. 14 analysts rate HOOD a Buy and none are calling for a Sell.

Even with Goldman Sachs raising its target to $81 last week, the broader analyst pool seems unconvinced that Robinhood’s rally is sustainable — especially now that the S&P 500 narrative has been removed. If sentiment turns or market momentum fades, HOOD may have to prove its fundamentals fast to avoid a retrace toward the street’s average.

See more HOOD analyst ratings