Crypto-friendly broker Robinhood Markets (HOOD) continues to trade near its all-time highs, despite some brief weakness following last week’s Q2 earnings results. Explosive growth combined with high expectations has fueled nearly 500% gains in the past year. The strong correlation with the crypto bull market has been the main driver, but the company’s solid execution in expanding monetization and growing net interest income has also played a key role.
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That said, with valuations pricing in a premium ~8x above the industry average—and given the business’s high volatility and cyclicality tied to crypto and the broader market—there’s a growing sense of caution. I’m not convinced that the bullish momentum—particularly in crypto—can be sustained, or that Robinhood can effectively capitalize on long-term tailwinds and mature into a more stable, established broker with sustainable client deposit growth. As a result, I’m skeptical of HOOD’s bullish thesis at current levels — I’m recommending a Hold on HOOD stock.
Robinhood’s Crypto Exposure and Asset Gap
One of the main issues that bothers me about the bullish thesis on Robinhood is how its stock increasingly behaves like a crypto proxy. In current market conditions, the correlation between HOOD and Bitcoin (BTC) is exceptionally high—around 0.92 (where 1.0 means perfect correlation)—which suggests investors still see it primarily as a leveraged bet on crypto adoption.
That actually makes sense, given that crypto trading remains a core business line, and the company continues to expand its crypto product suite, including wallets. The problem is, HOOD is more volatile than simply owning Bitcoin. Since its IPO in July 2021, Robinhood’s stock has seen deeper drawdowns than BTC itself—highlighting its higher downside beta.
A less flattering comparison comes from Robinhood’s total platform assets—which is a broader measure than just AUC (assets under custody)—of $278.6 billion, and dividing it by 26.5 million accounts, we get an average asset value per client of just $10,490. That’s a far cry from competitors like IBKR (IBKR), which holds $664 billion in AUC across 3.3 million accounts—translating to roughly $201,200 per client.
This huge gap reinforces how Robinhood’s customer base is smaller-ticket, more sensitive to noise, and deeply exposed to market cycles. On the flip side, though, it also shows how much internal runway the company still has if it can scale up client wallet sizes over time.
Monetization Evolution Accelerates
But clearly, correlation with crypto and a bull equities market isn’t the same as causation. That relationship could easily break if Robinhood’s business mix continues to evolve. According to CEO Vlad Tenev, the company has been expanding into a variety of business lines—from core equity and ETF trading to options, crypto, futures, and even event contracts. And importantly, each of these has already crossed the $100 million mark in annual revenue.
The shift in Robinhood’s three main revenue streams has been pretty telling. Transaction-based revenues—driven by crypto, options, and equity trading—are still the biggest contributor during bull market booms. But their relative importance has been fading since peaking in Q4 2024. In fact, the segment dropped from $672 million to $539 million quarter-over-quarter—a near 20% decline.
On the flip side, net interest revenues have been climbing steadily, hitting $357 million in Q2—a 23% jump quarter-over-quarter and 25% year-over-year. They now make up 36% of total revenue, a sign that Robinhood is becoming more “bank-like,” thanks to income from margin lending and cash sweep programs.
Another bright spot that’s been well-received by the market is the “other revenues” bucket. This includes Robinhood Gold (a subscription that offers premium trading perks) and “Strategies,” a feature giving users access to pre-built investment portfolios. This segment achieved sturdy growth in Q2, reaching $93 million—up 72% in just one quarter.
All these positive developments have translated into a 45% year-over-year revenue jump in Q2, totaling $989 million. ARPU (average revenue per user) rose from $84 to $151 in two years. Put simply, Robinhood has found innovative ways to boost monetization—whether through interest income, subscriptions, or higher-margin trading products.
Robinhood’s Growth Priced for Perfection
Given that Robinhood is still in a “growth-to-profit” transition—and has a volatile bottom line that swings with the broader market—revenues tend to give a better picture of its actual activity and scaling power. That’s why valuation multiples like price-to-sales (P/S) are a more fitting metric here.
And on that front, things look stretched. Trading at 24.7x P/S—over 700% above the industry average—the market seems extremely bullish on Robinhood’s ability to unlock growth and close the massive asset-per-client gap versus more established platforms. For context, IBKR trades at 4.9x P/S, which is already about 70% higher than the industry norm.
Even so, I see these high multiples as signaling very lofty expectations—expectations that Robinhood will keep delivering well above market averages. But if we hit a crypto downcycle, if the equity bull market cools off, or if interest rates start falling, the risk of a major earnings disappointment is way higher for Robinhood than for its more diversified and stable peers.
Is Robinhood Markets (HOOD) Stock a Good Buy?
Despite valuation concerns, Wall Street’s consensus on HOOD remains pretty bullish. Over the past three months, 13 out of 19 analysts have rated it a Buy, with five at Hold and just one Sell. Moreover, several analysts raised their price targets after the Q2 results. HOOD’s average stock price target is $108.06, implying an upside potential of 8% over the next twelve months.
Riding Robinhood Markets with Caution
Robinhood has been a strong proxy for both the crypto bull market and broader equities rally, arguably doing a solid job diversifying its business mix and giving plenty of reasons for optimism—so long as macro conditions stay favorable.
For now, it’s hard to bet against a company with this kind of momentum, especially one poised to benefit from long-term crypto tailwinds. But given the inherent cyclicality of capital markets, its tight correlation with crypto, and a high beta, the idea of a more stable, mature customer base—like that of legacy platforms—still feels like a distant goal. And with valuation multiples sitting sky-high, the bull case starts to carry a level of risk that, in my view, goes beyond what’s comfortable for long-term investors.
All things considered, I remain Neutral on HOOD. As it stands, it’s a high-risk, high-reward play on a bull market that will likely have plenty of gyrations in the months ahead.