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Key Points
What goes down must come back up. This is the hope of cryptocurrency traders -- and also of Robinhood investors.
Yesterday, Robinhood stock dropped more than 4% due to a sell-off in cryptocurrencies like Bitcoin, Ethereum, and especially Solana. Concerns about China's potential crackdown on stablecoins spooked crypto traders. Given that crypto trading is Robinhood's fastest-growing segment, there was worry among investors that a rapid exit in crypto could impact Robinhood's growth rate.
But what happens if crypto traders don't flee the market?
The Crypto Empire Strikes Back
This is the scenario being considered today, as Bitcoin prices rebound 7.5%, recovering all of yesterday's losses and more. Ethereum and Solana show even stronger gains, up 9.6% and 12.8%, respectively.
Stock investors view this as positive news for Robinhood, as the brokerage's stock is up 2.9% by midday.
Why Now Might Be a Good Time to Buy Robinhood Stock
In its Q3 earnings report last month, Robinhood credited crypto trading as a key factor behind its more than doubled revenue year over year. In Q2, crypto trades accounted for 30% of "transaction-based revenue," and in Q3, crypto volume more than doubled sequentially.
Clearly, crypto is significantly influencing Robinhood's value at present. Therefore, today's brisk rebound in crypto trading is seen as a positive for Robinhood's stock.
At a stock price 53 times trailing earnings, Robinhood shares may appear expensive. However, as long as the cryptocurrency market remains active, Robinhood's growth could justify its current valuation.
Should You Invest $1,000 in Robinhood Markets Right Now?
Before making any investments in Robinhood Markets, consider this: The Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks for investors to buy now, and Robinhood Markets wasn’t one of them. These 10 stocks could deliver significant returns in the future.
Consider that when Netflix was recommended on December 17, 2004, a $1,000 investment back then would be worth $588,530 today. Similarly, an investment in Nvidia on April 15, 2005, would now be worth $1,102,885.
The total average return for Stock Advisor is 1,012%, significantly outperforming the S&P 500's 193%.
This article has been published in fool.com via Yahoo News.
Why Did Robinhood Stock Pop Today?
Robinhood needs crypto traders to grow. Luckily, not all of them are running away today.
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