Robinhood's SEC Challenges Likely Overblown, Shares Up as Market Shrugs Off Crypto Concerns: Analyst

Mizuho analyst Dan Dolev reiterated a Buy rating on Robinhood Markets, Inc HOOD with a price target of $21.

HOOD announced that it had received a Wells Notice from the SEC on May 4 stating that the SEC had made a preliminary determination to recommend an enforcement action against Robinhood Crypto alleging violations of Sections 15(a) and 17A of the Securities Exchange Act of 1934, the analyst flagged.

Also Read: Robinhood’s Expected Move To Profitability In 2024 ‘A Positive Sign’ Ahead Of Q1 Earnings, Analyst Says

The concerns regarding the notice are likely overblown as it is unlikely entirely new news, as investigative subpoenas from the SEC were previously disclosed, and crypto rebates represented 7% of fiscal 2023 revenues and 15% of AUC, as per the analyst. 

Also, Coinbase Global, Inc COIN, where crypto overall exposure is 100%, is up nearly 3x since receiving a Wells Notice in March 2023.

Dolev valued HOOD on 6x fiscal 2025 revenues. HOOD currently trades at ~5x EV / fiscal 2025 revenues, which is in line with the FinTech peer group multiple. He noted a premium is appropriate given the strong execution exhibited so far in fiscal 2024. 

Robinhood Markets stock gained 104% in the last 12 months. Investors can gain exposure to the stock via ARK Next Generation Internet ETF ARKW and ARK Fintech Innovation ETF ARKF.

Price Action: HOOD shares traded higher by 1.27% at $18.01 at the last check Tuesday.

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