Overvalued Robinhood: Avoid Buying Ahead of Investor Update

3 months ago

Parkev Tatevosian, CFA

"So all that being said, let me share with you my valuation of Robin Hood stock. I updated my intrinsic value per share calculation today and I increased the free cash flow expectations over the next several years by a meaningful amount which increased the intrinsic value per share. Prior to the update today, I valued Robin Hood business at around $35 a share. I upgraded that value to $48 per share. But still, compared to the current market price of 145, the stock looks meaningfully overvalued. And I'm not surprised. It's been one of the most popular stocks. And when stocks become popular, overvaluation tends to follow. Look no further than Tesla, Palunteer, etc. These are several of the most expensive, most overvalued stocks in the market. And Robin Hood is approaching that territory. I would have put Robin Hood in the category of Tesla. I would put Robin Hood in the category of Palunteer, meaning that it's a business that's experiencing excellent growth and is in a great position and capitalizing on trends that are improving the fundamentals of the business. Revenue is growing, customer counts are increasing, profits are expanding. That's more similar to Palunteer and less similar to Tesla where it's going in the opposite direction, but the stock price is increasing. So, all that being said, do I think Robin Hood stock is a buy ahead of its investor update? I would say no. The share price is already soaring. I see a bigger downside than I do any upside in the upcoming earnings release."

The speaker provides a detailed valuation of Robinhood, noting an intrinsic value increase from $35 to $48 per share despite a current market price of $145, which suggests that the stock is significantly overvalued. Consequently, he advises against buying the stock ahead of its investor update, citing a greater potential downside.

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