Robinhood hits new highs, valuations be damned
Robinhood Markets shares hit new all-time highs of over $101 Friday morning amid an upsurge in crypto prices.
(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions. I own Robinhood stock as part of my compensation.)
The company has been on a tear, rising more than 170% since the start of the year and more than 350% over the last 12 months. It’s been lifted, in part, by a series of federal government steps to link the world of crypto currencies more closely to the regulated financial system, opening up a range of opportunities for crypto-linked operations, analysts have said. The resilience of retail trading — even after the market almost plunged into a bear market in April — has also been a boon to the company’s business.
But the rapid rise has also pushed traditional metrics investors use to determine whether they’re paying too much for shares to quite high levels.
Robinhood’s price-to-sales ratio — based on expectations for sales over the next 12 months — is nearly 22x, and its price-to-earnings multiple is nearly 70x. (The same figures for the Nasdaq Composite are 4.5x and 28x, respectively.)
In a recent Lex column, linked above, scribes from the Financial Times commented that to justify the current valuation, “investors are making some heroic assumptions” about the company’s ability to continue to deliver rapid growth. They wrote:
“Nothing in markets ever moves in a straight line, be that trading activity or prices. There’s a lot happening that makes Robinhood worth watching but its share price at these levels involves using a lot of imagination.”
The company has been on a tear, rising more than 170% since the start of the year and more than 350% over the last 12 months. It’s been lifted, in part, by a series of federal government steps to link the world of crypto currencies more closely to the regulated financial system, opening up a range of opportunities for crypto-linked operations, analysts have said. The resilience of retail trading — even after the market almost plunged into a bear market in April — has also been a boon to the company’s business.
But the rapid rise has also pushed traditional metrics investors use to determine whether they’re paying too much for shares to quite high levels.
Robinhood’s price-to-sales ratio — based on expectations for sales over the next 12 months — is nearly 22x, and its price-to-earnings multiple is nearly 70x. (The same figures for the Nasdaq Composite are 4.5x and 28x, respectively.)
In a recent Lex column, linked above, scribes from the Financial Times commented that to justify the current valuation, “investors are making some heroic assumptions” about the company’s ability to continue to deliver rapid growth. They wrote:
“Nothing in markets ever moves in a straight line, be that trading activity or prices. There’s a lot happening that makes Robinhood worth watching but its share price at these levels involves using a lot of imagination.”
