This Unstoppable Stock Has 150% Upside, According to a Select Wall Street Firm -- but I'm Not Buying It

Core Viewpoint - The financial markets experienced significant growth in 2024, with Robinhood Markets benefiting from increased trading activity and achieving a record revenue of $1 billion in Q4 2024, but concerns about sustainability of growth, particularly in cryptocurrency and net interest revenue, are raised [1][3][10]. Group 1: Financial Performance - Robinhood's stock surged by 115% over the past year, with analysts predominantly giving it a buy rating, and Bernstein projecting a potential 150% increase in stock price [2][11]. - The company generated a record $1 billion in total revenue in Q4 2024, with transaction revenue reaching $672 million, reflecting a year-over-year growth of 236% [3][4]. - Cryptocurrency trading significantly contributed to transaction revenue, accounting for $358 million, which is a staggering 733% increase compared to the previous year [4]. Group 2: Cryptocurrency Revenue Concerns - The rapid growth in cryptocurrency revenue in 2021 was not sustainable, leading to a 75% decline in revenue a year later, raising concerns about the current market conditions [5][6]. - Current market trends show steep losses in major cryptocurrencies, which may lead to a decline in Robinhood's crypto transaction revenue in Q1 2025 [7]. Group 3: Net Interest Revenue - Net interest revenue has become a crucial part of Robinhood's business, accounting for nearly 30% of total revenue, up from 14% in 2021 [8]. - In Q4 2024, Robinhood earned $296 million in net interest revenue, supported by $4.3 billion in cash reserves and $4.7 billion held for clients [9]. - However, recent interest rate cuts by the Federal Reserve may negatively impact net interest revenue, potentially offsetting transaction revenue growth [10]. Group 4: Future Outlook - Bernstein's optimistic forecast for Robinhood's stock price is based on Q4 growth and new AI-driven products aimed at expanding the investor base [11]. - Despite the positive outlook, skepticism remains regarding the ability to maintain high growth rates in transaction revenue, especially given the current price-to-sales ratio of 13, which is significantly above its historical average [12][15]. - Wall Street's consensus estimates suggest Robinhood could generate $3.7 billion in total revenue in 2025, indicating a forward price-to-sales ratio of 10, which still reflects a premium valuation [15].