JPMorgan Boosts Robinhood Price Target Ahead of Q3 Earnings

JPMorgan analysts raised Robinhood Markets (NASDAQ:HOOD) price target to $21 from $17 while maintaining an Underweight rating ahead of the company’s third-quarter 2024 earnings. The analysts adjusted their model based on recent trading volumes, revenue projections, and evolving market conditions expected to impact the popular trading platform.

After a volatile August that saw a surge in deposits and trading volumes, September experienced slower activity. The analysts anticipate end-of-quarter flows to reach around $11.2 billion, up from the $7.5 billion recorded by August. They project strong year-over-year growth in trading activity, modeling equity daily average revenue trades (DARTs) to rise by 30% and options and crypto DARTs by 50%, resulting in approximately $325 million in transaction revenue.

Much of the discussion among investors has focused on Robinhood's net interest income (NII) as rates decline. Management has suggested that increased trading could counterbalance rate-driven declines in net interest revenue. The analysts agree that a positive market environment, supporting the asset base, could mitigate the impact of falling rates, especially with securities lending revenue trends following the Fed’s outlook into 2025.

The analysts also adjusted expense projections slightly, estimating third-quarter expenses at $488 million, near the midpoint of the annual guide. This estimate reflects additional share-based compensation from a stronger equity year and costs associated with mergers, acquisitions, and legal expenses.

The revised price target and outlook underscore Robinhood's resilience amid market fluctuations and growth in core trading areas, although near-term challenges in the margin and securities lending environment persist.