Robinhood Markets delivered first-quarter earnings that surpassed analyst expectations.
The company is benefiting from the stock market volatility, driving record levels of trading revenue.
Robinhood's diversification into a wider range of financial services is a new growth driver that lends further support to a positive outlook.
Amid the broad stock market sell-off at the start of 2025, Robinhood Markets(NASDAQ: HOOD) has emerged as a surprising outlier. At the time of writing, shares of the online brokerage and fintech innovator are up 30% year to date.
Shareholders can thank, in part, the wild swings on Wall Street this year, which have driven a surge in client trading activity, supporting sharply higher revenue. The company has also capitalized on an expanding lineup of new banking and wealth management products, underscoring its transformation into a full-fledged financial services provider.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
With a promising outlook for these trends to continue, is that enough for the stock price rally to keep going? Let's discuss whether Robinhood stock is a buy now.
Image source: Getty Images.
Operating and financial momentum
Recognized for pioneering commission-free stock trading, Robinhood's business model disrupted the brokerage industry nearly a decade ago. A user-friendly interface with features like fractional share trading and support for cryptocurrencies has since proven highly popular.
Today, the company counts 25.8 million funded customer accounts, a level that increased by 8% in the past year. CEO Vladimir Tenev notes these customers are not only trading more actively, but are also directing more of their total assets into the platform. That dynamic has been a boon for the business.
In the recently reported first quarter, net revenue climbed by a spectacular 50% year over year to $927 million, led by cryptocurrency transactions and strong gains in options and equities trading. Robinhood now has $221 billion in total platform assets, up from $130 billion last year, including a record of $18 billion in net deposits during the first quarter.
A key development has been the diversification beyond trading, as Robinhood leverages the rise of engagement into cross-selling opportunities. That includes the Robinhood Gold subscription, a premium offering with a monthly fee. The service has seen an accelerated rate of adoption, reaching 3.2 million subscribers and 12% of the total customer base compared to 7% in the prior-year quarter.
The impact is evident in the rapidly expanding profitability. First-quarter earnings per share of $0.37 surpassed Wall Street expectations closer to $0.33, and more than doubled from $0.18 in Q1 2024.
Robinhood management is projecting confidence in its growth outlook, citing strong preliminary data for the second quarter. Notably, the company has upsized its share repurchasing authorization by $500 million, reflecting its underlying cash-flow trajectory and robust balance sheet.
Robinhood stock can keep climbing
Within a highly competitive industry where multiple players, including larger brokerage firms such as Charles Schwab and Interactive Brokers, are now offering commission-free trading and access to crypto, Robinhood is managing to stand out with stronger growth. Ultimately, the bullish case for the stock is that the company is just getting started in its expansion efforts with plenty of room to capture market share.
Robinhood's acquisition of TradePMR, a deal that closed earlier this year, points to the company's future, bridging its leadership in retail investing with professional wealth management solutions. By integrating TradePMR's platform, which serves approximately 350 registered investment advisor (RIA) firms, Robinhood has gained an immediate foothold in the advisory and financial planning business, appealing to individuals seeking more personalized guidance. The expectation is that these new relationships will add to companywide customer growth and total platform assets.
Another growth driver for Robinhood is its entry into international markets, including the United Kingdom and an upcoming launch in Asia. While the company's ability to replicate the success it has had in the U.S. is yet to be tested internationally, the market definitely sees its long-term growth potential.
The big picture for investors
The first-quarter results from Robinhood present an increasingly durable business generating higher-quality earnings. The stock isn't cheap, trading at a forward price-to-earnings (P/E) ratio of 34.5, although that premium valuation can be justified based on the company's compelling growth outlook backed by overall solid fundamentals. For investors with a long-term time horizon, I believe Robinhood stock is worthy of buying for a diversified portfolio.
Should you invest $1,000 in Robinhood Markets right now?
Before you buy stock in Robinhood Markets, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Robinhood Markets wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider whenNetflixmade this list on December 17, 2004... if you invested $1,000 at the time of our recommendation,you’d have $623,685!* Or when Nvidiamade this list on April 15, 2005... if you invested $1,000 at the time of our recommendation,you’d have $701,781!*
Now, it’s worth notingStock Advisor’s total average return is906% — a market-crushing outperformance compared to164%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
Charles Schwab is an advertising partner of Motley Fool Money. Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Interactive Brokers Group. The Motley Fool recommends Charles Schwab and recommends the following options: long January 2027 $175 calls on Interactive Brokers Group, short January 2027 $185 calls on Interactive Brokers Group, and short June 2025 $85 calls on Charles Schwab. The Motley Fool has a disclosure policy.
