Robinhood: a great franchise, but the price discounts more growth than we model

Key takeaways

• FY25A revenue rose 51.6% to $4,473m at a 56.4% adjusted EBITDA margin; platform assets were $369bn at June 30, 2026 (+32% y/y)
• Our FY27E EPS of $2.49 is 14.4% below the $2.91 consensus, as volumes grow about 3% a quarter while take rates and yields drift down
• Event contracts, options and crypto are 46% of revenue and move with retail risk appetite and unsettled regulation
• Initiate at Sell with a $92 target (bear $42, bull $143), 15.6% below the price

Investment thesis

Robinhood is compounding faster than almost any broker, but three of its fastest-growing lines (event contracts, margin interest and equities) depend on market activity or unsettled regulation, while the lines that cushioned FY25A (crypto, securities lending and corporate cash interest) are shrinking. The price needs 36.5% annual net income growth for FY29E to FY36E, against 13% in our base case.

Valuation

Our $92 target blends 40x next-twelve-months P/E (70%) with our DCF (30%). Bull is $143 and bear $42, weighted 25/50/25. At $109.02 the shares trade at 43.8x our FY27E EPS of $2.49.

Our estimates

Risks to our view

• Valuation multiple compression to 30x P/E, worth about $20 a share
• An adverse prediction-market ruling that removes sports contracts, worth about $16 a share
• A retail market-cycle drawdown that cuts trading volumes 20%, worth about $13 a share
• Slower customer growth or higher churn, worth about $13 a share
• Upside risk: our $143 bull case, which would need more than a 31% weight to lift our value into the Hold band