How Robinhood Avoids Crypto Crackdown

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Mizuhos Dan Dolev rates Robinhood shares a buy and holds a price target of $14. The time of dreams

As the government cracks down on crypto, adjacent crypto trading firm Robinhood Markets has so far been spared, and for good reason, according to analysts at Mizuho Securities.

While Robinhood (ticker: HOOD) has touted its crypto offerings, it doesn’t carry much risk in the industry. Less than 2% of Robinhoods crypto assets in custody include potentially controversial tokens such as Polygon, Solana or Cardano, Mizuho chief executive Dan Dolev wrote on Wednesday. This represents less than 1% of Robinhoods total assets under custody.

Dolev also notes that crypto trading accounted for around 9% of Robinhoods Q1 revenue, that’s a significant contributor to the business, sure, but not so big that the headwinds in the crypto industry would be. detrimental to the wider business of Robinhoods.

In comparison, Coinbase Global (COIN), which was one of the crypto exchanges targeted by the Securities and Exchange Commission for violating US securities laws, relies heavily on trading smaller tokens other than Bitcoin. According to Dolev, these so-called alt-coins accounted for around 45% of trading volumes and 22% of the company’s revenue in the first quarter.

For reasons outside of Robinhoods’ cryptographic isolation, Dolev remains bullish on the company. He rates the stock long and holds a price target of $14, nearly 50% higher than recent trading levels and 20% higher than the average price target of analysts polled by FactSet.

Medium-term prospects for Robinhood include using its $6 billion in cash for opportunistic mergers and acquisitions and stock buybacks, Dolev wrote. Robinhood also has ambitions to expand into the UK by the end of the year with further international ambitions beyond that. Longer term, Dolev is optimistic about Robinhoods’ plans to expand beyond brokerage services to the use of artificial intelligence to provide a wider suite of financial planning services, including budgeting and cash flow management for its users.

Robinhood shares have fallen around 75% since the time the stock went public in August 2021, as the company faced less hospitable financial markets and a drop in business activity following the surge during the pandemic, when cash-rich retail traders were largely stockpiled at home. Since then, the stock has become something of a battleground: 27% of analysts polled by FactSet believe they share the equivalent of a buy, while 27% share a sell. The others have a sustain note.

Whatever Robinhood’s problems are, crypto won’t be one of them.

Write to Carleton English at [email protected]

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