The Price Fell, the Business Didn't: The Case for HOOD

The setup

Robinhood is down about 45% from its 2025 high. If you only looked at the chart, you'd assume something broke. Then you look at the quarter they just reported.

Revenue hit a record $1.42 billion in Q3. Crypto revenue fell 55%, which would have sunk the old Robinhood, and the company still put up $808 million in adjusted EBITDA. That's a 57% margin.

The price fell. The business didn't.

Three things that matter

Prediction markets are the new engine

Event contracts brought in $173 million last quarter on a record 16.4 billion contracts traded. That's more than crypto made. Robinhood takes roughly a penny per contract whether prices go up, down or sideways, so this revenue doesn't swing with bitcoin the way crypto trading does.

Volume has set a new record four quarters running. Yes, some states are fighting the sports contracts, and that fight will make headlines for a while. But federal support is still there, and Robinhood is moving more of the activity onto its own exchange. The business is already big enough to move the needle, and it's still growing.

The real story is the money customers keep there

This is the part I care about most. Customer assets grew 19% to $396 billion, and funded accounts rose 7% to 28.7 million. Over the past year, customers brought in $71 billion of net new money, equal to 21% of what they held a year earlier.

They're also using more of the platform. Gold subscribers are up 34% to 5.2 million, the Gold Card has 1.3 million users, and retirement balances jumped 51% to $36.6 billion. Nobody moves their IRA every time the market gets choppy. This money tends to stay put and grow, even in quarters when trading slows down.

Crypto is now a bonus, not a requirement

Quarterly crypto revenue has dropped from $268 million to $120 million. A couple of years ago that alone would have been the bear case. Now it barely dents the thesis.

If crypto ever gets back to where it was, that's roughly $590 million a year in extra revenue on costs that are mostly already paid for. I'm not counting on it. If it happens, it's gravy.

The valuation, and what could go wrong

It's not cheap. At roughly 39 times trailing earnings, there isn't much room for the multiple to go higher, and the stock gets punished when growth disappoints. You saw a version of that after this quarter's report.

But this company has a habit of growing through rough stretches. Gold subscribers have gone up in each of the last four quarters, and the stock has come back from much uglier drawdowns than this one. If deposits keep coming in, customers keep going deeper and prediction markets keep scaling, earnings can grow fast enough to carry the stock higher even if the multiple shrinks a bit.

The two risks I'd watch are regulators pushing back on sports contracts and competitors squeezing take rates. Neither has slowed volume so far. What I'm really watching is whether net deposits stay strong and whether prediction markets keep growing. Right now both are heading the right way. The stock price says the market doubts that. The numbers don't.

My price target: $130 to $135

My target is $130 to $135 a share. With the stock closing at $84.99 on October 30, that's about 53% to 59% upside.

The math is simple:

1. Start with earnings. Heading into Q3, analysts expected about $2.15 a share for 2026.

2. Roughly double them. Steady deposit growth, more Gold subscribers, prediction markets, buybacks and a cost base that's mostly fixed can get earnings to roughly $4.20 a share. That assumes crypto never recovers.

3. Put a lower multiple on it. I'm using 31x to 32x, well below today's roughly 39x. $4.20 × 31 is about $130, and $4.20 × 32 is about $134.

That doubling is doing the heavy lifting, so be honest with yourself about it. If earnings rise only about 50%, the same multiple gets you to around $100. If crypto comes back, $135 starts to look conservative.

Bottom line

Robinhood used to be a bet on retail trading frenzies and crypto prices. It's turning into a place where people actually keep their money, and more of its revenue no longer depends on any one hot market. The stock hasn't caught up to that yet. I think it will.

Disclosure: I only own HOOD indirectly, through funds, and it's a small position. This isn't investment advice.