'A singularity that captures Generation Z's zeitgeist': Here's what 3 Wall Street analysts are saying about Robinhood now that the online-brokerage king has gone public

Vlad Tenev, CEO and Co-Founder, Robinhood in his office on July 15, 2021 in Menlo Park, California. — Vlad Tenev, CEO and co-founder, Robinhood.
Kimberly White/Getty Images for Robinhood

Shares of Robinhood have significant downside and upside potential, depending on which Wall Street analyst you ask.
Following Robinhod's IPO last month, Wall Street is beginning to issue analyst notes on the stock trading app popular with millennials and Gen Z.
Here's what 3 Wall Street analysts are saying about the potential future of Robinhood.
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Should investors buy or sell Robinhood? Views are mixed on Wall Street.

The stock trading app popular with millennials and Gen Z is beginning to receive a slew of initiation notes from Wall Street firms following its July IPO.

Investors are likely anxious to know what analysts think about Robinhood's stock after its volatile post-IPO swings. The stock initially fell 13% from its IPO price of $38 per share, before rocketing more than 150% to a high of $85. The stock is floating just below $44 per share at time of publication.

Robinhood has face increased scrutiny from regulators and critical investors wary of the sustainability of its payment for order flow business model, which enables $0 commission trading. But the company has seen incredible growth over the past year amid the wild swings in stocks and crypto like GameStop and dogecoin.

Here's what 3 Wall Street analysts are saying about Robinhood's potential future.

JPMorgan: Underweight, Target Price $35

"We see investor recognition of Robinhood's success priced into the value of the shares. Furthermore, we see a number of risks including regulation, pricing, and market saturation, and challenges to the business including its focus on smaller accounts that we think limit Robinhood's ability to reach competitive margins and profitability," JPMorgan said in a Monday note.

"We see a highly engaged SEC that has fined and has continued to call out Robinhood specifically for activities and actions that it is investigating. Some risk involves how Robinhood is paid - PFOF and related crypto payments were 75% of revenue in 2020," JPMorgan said.

Goldman Sachs: Neutral, Target Price: $56

"We believe HOOD is well positioned to continue to see best-in-class user growth, leveraging its innovative referral program and strong word-of-mouth customer acquisition. In addition, we expect HOOD to increasingly focus on cross-selling its already considerable user base with additional financial services products, driving ARPU expansion over time and boosting growth in both the top line and AUC," Goldman said in a Monday note.

"While we are constructive on the longer-term story, we are launching at Neutral given 1) near-term uncertainty around the sustainability of retail trading levels, and 2) the ongoing overhang around payment for order flow, which could result in headline risk or in a worst case, significant estimate risk," Goldman added.

Mizuho: Buy, Target Price: $68

"With its 22.5mn active users and fetching 50% of all new retail US accounts, we view Robinhood not as a meme stock phenomenon, but as a singularity that captures Generation Z's zeitgeist," Mizuho analyst Dan Dolev said in a Monday note.

"Critics argue that HOOD bears outsized risk due to elevated options trading and user 'herd mentality'. We disagree. Our research shows that the differences between HOOD's mix of options and non-S&P stocks vs. peers are less dramatic than feared. We believe a TAM of 500mn US bank accounts, 2x ARPU upside potential, success in cash management, and becoming a single money app make HOOD attractive. We see sustained 40-50% two-year growth, and value HOOD at 14x 2023 revenue," Mizuho said.

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