Why Robinhood Stock Hit the Bullseye Today

Robinhood Markets (NASDAQ: HOOD) stock soared 12.5% through 11 a.m. ET Thursday after crushing its Q4 earnings report last night.

Analysts thought the online brokerage app would earn $0.52 per share in its fourth quarter of fiscal 2024, but Robinhood nearly doubled that number at $1.01 per share. Sales were expected to land at $951.8 million, but the company reported more than $1 billion in sales, more than a 100% increase.

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Robinhood Q4 earnings

Robinhood sales grew 115% year over year in Q4, with gains from interest on its holdings up 25%, and "transaction-based" (trading) revenue up more than 200%. As good as the revenue growth sounds, "net income increased over 10X," boasted Robinhood.

For the full fiscal year, revenue was up 58% to $2.95 billion and net income flipped from a loss in 2023 to a profit of $1.56 per share in 2024. Taken as a whole, this was an astoundingly good report for Robinhood, and investors are rewarding the stock amply in response.

Is Robinhood stock a buy?

That still leaves this question: Robinhood did terrific in 2024, but how will its stock perform in 2025 and beyond?

Management declined to give guidance for the new year, explaining: "We are not providing a 2025 outlook for total operating expenses and have not reconciled our 2025 outlook ... because we are unable to predict with reasonable certainty the impact of certain items without unreasonable effort." TheFly.com reports, however, that multiple analysts are raising their price targets on Robinhood, regardless, to as high as $105 a share. If they're right, Robinhood stock could have as much as another 70% in gains ahead.

But what if they're wrong?

At $49.5 billion in market capitalization, Robinhood stock costs 94 times trailing earnings today, which suggests investing at today's price could be risky. The stock's generating significantly more free cash flow than it reports as net income, however -- $2.2 billion last year. With a price-to-free-cash-flow ratio of only 22.5, Robinhood's even modest growth going forward could make the company's stock a buy.

Should you invest $1,000 in Robinhood Markets right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.