Robinhood (HOOD) Stock: Buying Opportunity or Warning Sign After 30% Drop?

Robinhood (HOOD) Stock: Buying Opportunity or Warning Sign After 30% Drop?

TLDR

• Robinhood stock has fallen 30% in 2025 despite doubling over the past year
• Company plans to launch Robinhood Banking this fall with features like doorstep cash delivery
• Assets under custody rose 88% year-over-year to $193 billion in Q4 2024
• Average account size remains small at $7,700, suggesting newer investors
• Robinhood has not yet faced a major market downturn as a public company, creating uncertainty

Robinhood Markets has seen its stock price plummet 30% so far in 2025, a steeper decline than competitor Charles Schwab’s 5% drop. This comes even as the company has doubled its share price over the past year and expanded its product offerings.

The trading platform announced plans to launch Robinhood Banking this fall. The new service will offer checking and savings accounts for Gold members with features designed to compete with traditional banks.

“We want to have the full wallet share with customers,” said Deepak Rao, vice president and general manager of Robinhood Money. “But we wanted to do it in our style and make sure that we build something that’s no longer reserved for ultra-wealthy individuals.”

One standout feature will be doorstep cash delivery within an hour, which the company believes will eliminate the need for ATMs. The banking product will also offer a 4% annual percentage rate on savings and up to $2.5 million in FDIC insurance.

This isn’t Robinhood’s first attempt at banking services. In 2019, the company withdrew a bank charter application and halted a savings account initiative after regulatory issues.

Growth and Expansion

Robinhood has transformed from a simple discount broker to a diversified financial services platform. The company now offers stock, options, and cryptocurrency trading, select banking services, prediction markets trading, and retirement investing.

In the fourth quarter of 2024, Robinhood’s assets under custody rose 88% year over year to $193 billion. This growth came from both new deposits and increases in the value of securities its customers own.

Revenue increased 58% in 2024, with earnings per share reaching $1.56, up from a loss of $0.61 in 2023.

The company continues to innovate with new features. CEO Vlad Tenev recently announced two additional services: Robinhood Strategies and Cortex.

Strategies is an advanced investing service offering expert-managed portfolios with a cost cap of $250 per year for Gold members. Cortex will be an artificial investment tool providing real-time market analysis.

Robinhood’s credit card, launched last year, has around 200,000 cardholders and 3 million people on the waitlist.

Market Concerns

Despite its growth, Robinhood faces several challenges. The company trades at a forward earnings multiple of 27.75X, higher than Coinbase’s 23.83X, suggesting investors are placing a premium on its growth potential.

One key concern is Robinhood’s lack of experience through a severe market downturn as a public company. The company went public after the pandemic-induced bear market, meaning Wall Street has no data on how Robinhood’s customer base might react to a prolonged downturn.

The average Robinhood account size is just $7,700, indicating many customers are likely young, less experienced investors. This raises questions about whether these users would stay invested during a severe market correction.

Robinhood also operates in a highly regulated industry and faces scrutiny from numerous authorities. Exposure to regulatory risks could result in fines and restrictions that affect profitability.

Additionally, the company continues to incur substantial stock-based compensation expenses relative to its net revenues, which dilutes shareholder value.

Despite these concerns, analysts remain optimistic about Robinhood’s prospects. The Zacks Consensus Estimate for 2025 revenues implies a year-over-year increase of 25.4%, with earnings per share expected to grow 34.9%.

Robinhood shares have gained 131.3% in the past year, outperforming Coinbase, which lost 26.7% in the same period.

For investors considering Robinhood stock, the key question remains whether the recent pullback represents an opportunity or highlights potential risk. The company’s push into banking and continued product innovation could drive growth, but its untested resilience during market downturns remains a question mark.

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