It’s really tough to bet against Robinhood Markets (HOOD) stock right now. Up 155% this year and more than 308% over the last twelve months, the commission-free trading platform has seen an extreme re-rating, fueled by the crypto rally and its rapid expansion of product offerings and user base. Recent price action has shown a monumental surge in performance in the first half of 2025, helping HOOD outperform the S&P 500 (SPX) by ~300%.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
The spark that ignited fresh optimism was the launch of “stock tokens,” which let users trade digital shares of traditional stocks and even private companies. This move has reignited optimism around Robinhood’s long-term growth story and pushed the stock to new highs, creating the sense of disruptive innovation that could change how financial markets operate.
On the other hand, despite this strong bullish momentum, Robinhood trades at very stretched valuations, exhibiting characteristics of a speculative bubble. What adds to my skepticism is the stock’s strong correlation with the volatile crypto market, making its performance vulnerable during crypto downturns, especially given how much of its price reflects expectations of explosive growth.
That’s why, despite the current momentum, I maintain a Hold rating on Robinhood. It’s essential to carefully consider whether this massive rally, which has been ongoing for more than a year, is truly sustainable or if it’s a speculative surge that could face sharp corrections in the near term.
Robinhood’s Big Bet on Blending Stocks and Crypto
Robinhood stock has been making waves recently, hitting all-time highs, which isn’t too surprising given its strong correlation with cryptocurrencies, pushing record-high net fund deposits from users. Moreover, wider market volatility in commodities, stocks, and fixed income has boosted trading volumes among retail brokers.
More specifically, the real catalyst behind Robinhood’s nearly 30% jump in just the last thirty days is quite interesting, and it’s the significant expansion of its product line, known as “stock tokens.”
This new product offers blockchain-based digital representations of real stocks, including prominent names like Nvidia (NVDA) and Apple (AAPL), as well as private companies such as OpenAI and SpaceX.
Simply put, Robinhood is attempting to blend traditional finance (stocks) with cryptocurrency technology by offering tokens that represent fractional shares of real stocks. These tokens can be traded 24/7, regardless of market hours, and provide access to private companies as well.
In my view, the bullish reaction is tied to the potential for a disruptive shift in both the crypto world and financial markets. While this strategy isn’t competing with Bitcoin (BTC) as a store of value, it leverages blockchain tech to create synthetic financial markets. This makes crypto more relevant to mainstream investors and could bring millions of new users into the crypto ecosystem, using wallets, stablecoins, and other infrastructure to hold these tokens.
Potential Drawbacks of Robinhood’s Token Plan
The caveat is that Robinhood is only offering “tokenized” shares of private companies in Europe, due to stricter regulations in the U.S. OpenAI, for instance, quickly distanced itself, saying, “These tokens are not our equity, we didn’t partner with Robinhood, and we don’t endorse this.”
What Robinhood is really selling is indirect exposure through a special purpose vehicle (SPV) that owns the actual shares and then issues tokens that track their value. So, investors don’t own the actual shares directly—instead, they hold a derivative, such as an option or a tracking stock. If this entire setup collapses due to poorly managed SPVs or legal bans, it could erode trust in the concept of tokenization.
That said, analysts appear to be quite optimistic about this new product expansion, particularly in the long term. Over the past month, EPS CAGR projections for the next five years have risen from 11.5% to 12.5%, while revenue projections jumped from 9.1% to 10.1%.
In my view, this positive revision in expert estimates explains why HOOD is hitting new highs, but also why it’s trading at an even higher multiple to justify its value.
Bubble Warning for Robinhood’s Sky-High Valuation
In my view, Robinhood trading at all-time highs resembles a bubble. Even the market consensus for the next five years—which already implies strong, robust growth—does not really justify the current share price. In terms of multiples, HOOD trades at 64x earnings, more than 6x the industry average. And even when the average long-term EPS CAGR is factored in, the PEG ratio remains extremely stretched at 5.
Moreover, assuming a revenue CAGR of 10.1% and an EPS growth of 12.5% over the next five years, Robinhood’s fair equity value is estimated to be around $17 billion. This calculation is based on last year’s $1.13 billion in revenue and a 39% operating margin, with stable tax rates, no changes in working capital, a 3% perpetual growth rate, and a weighted average cost of capital (WACC) of 7.5%. When we consider its current market cap of almost $87 billion, investors can be forgiven for thinking HOOD stock is overpriced.
In other words, the model would need to assume a perpetual growth rate of ~7% just to find any margin of safety in the current valuation, which is highly incoherent for any company, especially a trading platform so closely tied to crypto momentum swings.
Is Robinhood Markets a Buy, Hold, or Sell?
Most Wall Street experts remain bullish on Robinhood shares. Out of 20 analysts covering the stock in the past three months, 14 are bullish, five are neutral, and only one is bearish. However, HOOD’s average price target stands at $79.84, implying a potential downside of about 20% from the current share price.
Low Volatility Endangers Robinhood’s Long-Term Viability
The market has drastically re-rated Robinhood this year, driven by a bullish crypto sentiment and potentially disruptive moves in how blockchain technology is expected to attract millions of new users to crypto tokenization. Moreover, geopolitical strife, exemplified by developments around Donald Trump, China, Iran, and Russia, has also increased volatility across the board.
For retail brokers like Robinhood, higher volatility is almost a direct route to higher revenues and profits. Given that the first six months of 2025 have resembled a roller coaster (including a significant 20% selloff in the S&P), Robinhood’s cash register is ringing.
While the story around Robinhood is undoubtedly exciting, the valuation is anything but. In my view, regardless of how strong the bullish momentum may be, there’s virtually no margin of safety at current levels—HOOD is exhibiting clear signs of bubble-like behavior.
That said, with the stock’s trajectory so closely tied to crypto and Bitcoin momentum, trying to fight the trend doesn’t seem wise at this point. For now, I’m maintaining a Hold rating on Robinhood stock.