Robinhood's stock rockets as BofA sees retail renaissance in 'early innings'

By Emily Bary

BofA double upgrades Robinhood shares while abandoning bearish call on Coinbase's stock

Retail traders are storming back, and a BofA analyst thinks that's good news for Robinhood Markets Inc.

BofA's Craig Siegenthaler double upgraded the brokerage stock to buy from underperform on Friday, writing that Robinhood (HOOD) is still in the "early innings" of "rising retail engagement [and a] secular demographic shift to mobile."

The stock is up more than 8% in Friday morning action.

See also: GameStop, AMC drove $5 billion in trades on Robinhood in a single day

As retail engagement improves, Robinhood could reap the rewards on numerous metrics, according to Siegenthaler. Those include account growth, margin loan and payment for order flow, he noted.

"Retail engagement peaked in 2021 and then declined significantly through the [more than 500 basis points] of Fed rate hikes and the 2022 bear market, troughing in 2023," he said. "However, following the emergence of a new bull market last year, we have monitored a rebound in multiple metrics at Robinhood Markets."

For one, the company has sported 44% organic growth, one sort of positive trend he sees poised to persist into 2026.

Plus, "operating leverage opportunity and free-cash-flow conversion are somewhat underappreciated at this newer company," he added.

Siegenthaler had initiated coverage of Robinhood shares at underperform back in 2021. "We view the current entry point as the opposite" of that, he said in Friday's note, with the company jumpstarting its organic growth and seeing cost cuts manifest in terms of operating leverage.

He boosted his price target to $24 from $14.

Don't miss: Why are millions of people paying for Robinhood Gold?

Siegenthaler also upgraded shares of Coinbase Global Inc. (COIN) on Friday, but only by one notch. His new rating is neutral, up from underperform.

The cryptocurrency market is reaccelerating after hitting 2021 highs, and "the current market, while volatile" looks "more robust than prior boom periods," Siegenthaler noted, calling out a bigger investor base currently as well as more concentrated attention on "mature coins."

But there are also risks that cap upside, Siegenthaler said, including a regulatory cloud and the fact that transaction revenue remains a heavy profit driver.

Siegenthaler upped his Coinbase price target to $217 from $110. The stock is up almost 3% in Friday morning activity.

Read: Meme stocks like GameStop and AMC are hot again - what it means for meme coins

-Emily Bary

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05-17-24 1055ET

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