Author: Let’s Talk Money! with Joseph Hogue, CFA
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When is the Robinhood IPO is it a good investment? Full analysis of the Robinhood stock IPO, HOOD, and how to invest. Watch this video to see my step-by-step to valuing any IPO stock and whether to buy or not! https://youtu.be/ZnvbuEHw7YI
The Robinhood IPO is scheduled for July 29th but you can get access to the shares before the rest of the market. Robinhood users can buy the stock, ticker HOOD, at a pre-IPO price but is it a good investment? Most IPO stocks fall in the first six months but is it different when you can get in early?
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Robinhood has estimated the price of its IPO at between $38 to $42 per share with a 20% range around that. Users of the platform are able to request shares in one of two ways. You can agree to the price range and the band, meaning you could pay as much as $50 per share of Robinhood stock when it begins trading July 29th. You can also name your price but might not get any shares if the price is too low. Robinhood has said it will contact users to change their bid if the price is higher.
Robinhood in its pre-IPO SEC filings shows excellent first-quarter growth with over 18 million users and expecting 22.5 million users in the second quarter. It also says revenue for the second three months of the year could reach $574 million, which would be a new high. Despite the blowout numbers, Robinhood still lost $1.4 billion in Q1 due to marketing costs and warrant expenses.
The estimated Robinhood IPO price values the company around $33 billion which would make its valuation 20-times trailing sales. Now with the sales growth expected, the forward valuation is much lower but still higher than competitors like Schwab and Interactive Brokers. Robinhood users are almost entirely smaller retail investors and that is going to play into what I think could be the biggest shock for investors.
If you look at recent stock trading stats, interest by retail investors has fallen off a cliff. People are no longer stuck in their basement. With everyone getting back out, they aren’t trading stocks and that could be bad news for Robinhood stock. Unfortunately for investors, they may not see it until the Q3 numbers are released and it could cause the shares to crash.
If you can get shares in the Robinhood IPO for less than $45 or $50 then it might still be a good investment. I would sell immediately after the first day or week though to avoid that Q3 surprise. Maybe longer-term Robinhood stock will be a good investment but short-term there are a lot of risks.
0:00 Should You Buy the Robinhood IPO?
3:00 Robinhood IPO Date
3:15 How to Get Access to the Robinhood IPO
4:10 Robinhood IPO Price
5:10 Robinhood IPO Valuation
6:56 Is the Robinhood Stock IPO, HOOD, a Good Investment?
10:46 How to Invest in the Robinhood IPO
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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