Does Robinhood’s Soaring Stock Price Justify BofA’s New $119 Target?

Trying to decide what to do with Robinhood Markets stock? You are not the only one watching closely. This is a name that has absolutely dazzled traders, delivering an astonishing 421.2% gain over the past year, along with an eye-popping 1022.2% surge over three years. Even in just the past week, the stock jumped 13.6%. These moves reflect not only a rush of growth enthusiasm, but also shifts in how investors see the company’s risks and opportunities.

Recent news is fueling the conversation. For instance, BofA just nudged their price target higher, now expecting shares to hit $119. Their analysts pointed to a standout quarter, driven less by cost-cutting and more by robust business momentum. At the same time, the fintech world, including Robinhood, is buzzing in Washington as executives push for rules to keep customer data more accessible. Underneath it all, there’s a sense that Robinhood sits at the center of a financial technology arms race.

But here is the thing: when you put Robinhood under the microscope using standard valuation checks, it comes up short on every metric. According to the widely used valuation scorecard, the company is currently undervalued in 0 out of 6 checks, not a single green light on the traditional value radar.

So, what do all these valuation measures actually say, and is there a better way to cut through the noise? Let us break down the valuation approaches. Stick around, because we will finish with a smarter perspective that goes beyond the usual numbers.

Robinhood Markets scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Robinhood Markets Excess Returns Analysis

The Excess Returns model evaluates a company based on how much profit it delivers above the cost of its equity capital, focusing specifically on return on invested capital and projected growth in shareholder value. For Robinhood Markets, this approach calculates how efficiently the company converts equity funding into sustainable long-term profits.

Robinhood’s numbers provide some clarity here. The company’s Book Value is $9.09 per share, while its Stable EPS (Earnings Per Share) projects to $2.10, according to weighted estimates from seven analysts. The Cost of Equity per share is $1.02, meaning Robinhood is expected to generate $1.08 per share of “excess return.” This is profit above what investors demand for their risk. The average projected Return on Equity is a strong 17.33%. Looking further out, analysts expect the Stable Book Value to reach $12.11 per share, based on four analyst forecasts.

Based on these fundamentals, the Excess Returns model estimates Robinhood’s intrinsic value at $32.57 per share. Compared to today’s much higher trading price, this means shares are trading at a 253.2% premium to their modeled intrinsic worth. In other words, the market may be pricing in much more optimism than what current and projected returns can justify.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Robinhood Markets.

Our Excess Returns analysis suggests Robinhood Markets may be overvalued by 253.2%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Robinhood Markets Price vs Earnings

The Price-to-Earnings (PE) ratio is generally the preferred metric for evaluating established, profitable companies. It shows what investors are willing to pay today for a dollar of the company's earnings. When a business is consistently profitable, the PE ratio captures the market's expectations for its future growth and the risks involved in sustaining those profits.

What counts as a "fair" PE ratio depends on several factors, such as how fast a company is growing, how reliable those earnings are, and the risk profile. Rapidly growing or lower-risk stocks often justify higher PE multiples, while slower-growing or riskier names typically see lower ones.

Currently, Robinhood trades at a PE ratio of 57.17x, which is more than double the Capital Markets industry average of 27.16x and well above its peer group’s average of 27.36x. Simply Wall St offers an additional perspective with its Fair Ratio metric, determining a custom fair PE multiple for Robinhood at 28.08x. This proprietary figure blends growth, profit margin, and size, as well as reflecting unique risks and the specific landscape in which Robinhood operates. This makes it more targeted than a general industry or peer comparison.

The key takeaway is that Robinhood’s actual PE is far above its Fair Ratio, suggesting the stock is trading at a notable premium to its justified value based on all key fundamentals.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Robinhood Markets Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply the story you believe about a company—why it will win or lose, what its future looks like, and how those beliefs translate to expectations like fair value, future revenue, earnings, and margins.

Narratives go beyond just crunching numbers by linking your view of a company's future to a concrete financial forecast and fair value estimate. This makes it much easier to see the reasoning behind your investment decision. With Simply Wall St's Narratives, available on the Community page used by millions of investors, you can quickly assess whether you agree with the market’s price by comparing Fair Value (based on your Narrative) to the current trading price.

These Narratives update dynamically whenever news or earnings impact the company, ensuring your view stays current. For example, one Narrative on Robinhood sees major regulatory delays and product challenges, estimating fair value as low as $50, while another expects robust product innovation and market expansion to justify a value as high as $160. The choice of Narrative and investment action is always yours, guided by the story you believe most.

Do you think there's more to the story for Robinhood Markets? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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