Robinhood, the trading platform, has been initiated with a market perform rating and a $20 price target by KBW as retail trading sees a resurgence.
According to the report, retail engagement saw significant acceleration in the first quarter, prompting KBW to commence coverage of Robinhood. The firm notes that Robinhood‘s share price surged notably as retail trading activity intensified.
The duration of this upsurge in retail trading remains uncertain, with KBW raising questions about its sustainability. The research report highlights the potential for continued strength in retail stocks and cryptocurrency prices, suggesting that the heightened engagement from retail investors may persist or even grow.
However, KBW analysts caution that the stock’s current price already reflects the anticipated benefits from new product launches and an increased level of normalized retail trading activity. They anticipate a moderation in retail activity from the levels observed in the first quarter, with a gradual decline expected into 2025.
Despite this, KBW underscores the rapid growth potential of the U.S. self-directed brokerage industry, positioning Robinhood as a burgeoning player in this expanding market. With Robinhood currently holding approximately 1% share of U.S. self-directed assets and about 20% share of estimated total U.S. self-direct brokerage accounts, there is room for the platform to surpass overall industry asset growth as its client base matures.
Robinhood’s shares closed at $19.20 on Tuesday, reflecting a year-to-date gain of over 50%.