HOOD

We rate Robinhood Markets, Inc. (HOOD) as a Reduce with a composite score of 44.7/100 at a current price of $73.22. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in quality (62th percentile) and momentum (49th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (10th percentile) and investment (23th percentile) tempers our overall conviction. We assign a Narrow Moat rating (58/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress; sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Robinhood Markets, Inc. holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 44.7/100 places it at rank #2845 in our full 7,333-stock universe. With a $127.2B market capitalization, Robinhood Markets, Inc. operates at meaningful scale within the Finance, Insurance, And Real Estate sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 87%, though momentum at the 49th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 98% (+21.5pp vs sector) narrow to operating margins of 39% (+22.4pp vs sector) and net margins of 35.6%, yielding a gross-to-net conversion rate of 36%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $73.22, Robinhood Markets, Inc. is trading near fair value based on current fundamentals. Our value factor score of 41/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 48.0x (a 303% premium to the sector median of 11.9x), EV/EBITDA of 43.0x (at a premium), P/B of 7.5x, P/S of 17.9x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Very High uncertainty rating to Robinhood Markets, Inc.. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 2.61), significant leverage (317% debt-to-equity), below-average price stability (10th percentile). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 2.61); significant leverage (317% debt-to-equity); below-average price stability (10th percentile); elevated valuation multiple (P/E 48.0x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 10th percentile and quality factor at the 62th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 98% provide a buffer against cost pressures; large-cap scale ($127.2B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Robinhood Markets, Inc.'s capital allocation as Poor. Key concerns include elevated leverage (317% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Robinhood Markets, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Robinhood Markets, Inc. receives a Reduce rating with a composite score of 44.7/100 (rank #2845 of 7,333). Our quantitative framework assigns a Narrow Moat (58/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 37/100.

Our analysis does not support a constructive view on Robinhood Markets, Inc. at this time. The combination of the current quantitative profile, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.