Robinhood Markets has showcased impressive organic growth, registering an overwhelming 40% increase for the second consecutive quarter, as reported by BofA Securities earlier this week. The firm has raised its price target for Robinhood’s stock to $32 from a previous estimate of $28, reaffirming its buy rating based on the latest earnings report.
Notably, Robinhood achieved a second-quarter earnings per share (EPS) of $0.21, significantly outpacing both BofA's and Wall Street's consensus expectations, despite the company's operating expenses witnessing a 6% increase year over year. The brokerage's total revenue surged to an impressive $682 million during the June quarter, reflecting a 40% year-over-year growth, and outperforming the average analyst forecast of $642.6 million, according to data compiled from Capital IQ.
This revenue boost was driven by a remarkable 69% increase in transaction-based revenue, amounting to $327 million, alongside a 22% rise in net interest revenue to $285 million. Furthermore, Robinhood’s net deposits displayed annualized growth of 41% during the quarter, reaching a staggering $13.2 billion. Chief Financial Officer Jason Warnick disclosed to analysts that the company had exceeded $4 billion in net deposits by July, translating to an annualized growth rate of 34%.
Additionally, it was reported that more than $1 billion in deposits were secured within the first week of August, showcasing continued investor confidence through a Capital IQ transcript. In an optimistic outlook, BofA analyst Craig Siegenthaler noted that with the upcoming launch of index options and futures trading anticipated in the fourth quarter, coupled with a new desktop platform aimed at active traders, Robinhood is poised for sustained acceleration in client engagement.
This is significant, especially considering that several essential products favored by active traders are still pending launch. BofA has also raised its EPS target for Q3 to $0.19 from $0.12, along with upgrading forecasts for 2024 through 2026, driven by robust organic growth and elevated trading volumes, despite a slight uptick in operational expenses. BofA highlighted that the company is likely to continue benefiting from favorable market conditions and an expanding market share attributable to its competitive pricing strategy.
Additionally, Robinhood reiterated its full-year operating expense guidance, expecting it to remain in the $1.85 billion to $1.95 billion range. As investors look to capitalize on Robinhood's enhanced service offerings and market positioning, the stock closed at $18.55, marking an increase of 3.49% for the day..