Compass Point Rates Robinhood Markets Inc. a Buy

Investment bank Compass Point rated Robinhood Markets Inc. a buy, setting a price target of $61. This was noted in a report on Wednesday which highlighted the increased average revenue from its 12 million crypto users alongside an improving U.S. regulatory environment.

Revenue Potential

Compass Point analysts estimated that Robinhood had the potential to generate $665 million from cross-selling to existing U.S. customers, including $150 million from staking alone.

Cautious Approach to Expansion

According to Compass, “HOOD’s crypto business has underearned while taking a cautious approach to U.S. product expansion.” The company’s crypto revenue was identified as being only 19% of Coinbase’s non-interest revenue.

Despite challenges, Compass noted that after developing extensive infrastructure for non-U.S. users, Robinhood could launch additional crypto services in the U.S. with limited additional investment.

Growing Interest in Digital Assets

Compass’ report reflects the growing interest in digital assets from traditional finance, as more investors begin to consider these assets. On Monday, the broker Bernstein also began covering Coinbase, establishing a nearly 70% upside on the stock, citing a more crypto-friendly environment following the election of U.S. President Donald Trump.

Stock Performance and Market Conditions

Menlo Park, California-based Robinhood saw its stock close up more than 6%, trading just over $42 per share, amid wider gains in crypto stocks and other risk-on assets. However, the share price has faced pressures in recent weeks due to mounting fears concerning a trade war that could trigger stagflation – a combination of sluggish economic growth and rising prices.

Recent Developments

Robinhood’s recent performance has enjoyed momentum; the fourth-quarter crypto trading revenue skyrocketed 700%, contributing to an overall revenue increase of 115% year-over-year as reported in February.

In a positive turn, the U.S. Securities and Exchange Commission announced it was closing an investigation into Robinhood’s crypto arm without pursuing enforcement action.

Earlier this week, the company launched a prediction market that allows users to bet on this year’s NCAA basketball tournament, known as March Madness.

Compass concluded that Robinhood’s “crypto users provide attractive liquidity for institutional traders.”

Edited by Sebastian Sinclair