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On Monday, Robinhood Markets Inc. (NASDAQ:HOOD) shares surged greater than 5% regardless of receiving a ranking downgrade from JPMorgan analyst Kenneth Worthington, citing the corporate’s unsustainable development prospects.
In a observe to traders, Worthington wrote:
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We query the flexibility of the corporate to generate aggressive margins over time given the give attention to such small accounts which have restricted room to be worthwhile. [Robinhood is] inferior to bigger current members which were capable of leverage peer-to-peer and funds expertise to construct and leverage a compelling community.
The analyst additionally assigned a worth goal of $35.00 per share, implying a draw back potential of about 18% from its closing worth final week.
Do you have to purchase or promote Robinhood shares in Q3 2021?
From a valuation perspective, Robinhood shares commerce at a comparatively steep ahead P/E ratio of 42.64, making the inventory much less enticing to worth traders. Nevertheless, its development prospects look thrilling, with analysts predicting earnings per share to develop by 102% this 12 months earlier than growing 171% subsequent 12 months.
Due to this fact, development traders may discover the HOOD inventory compelling forward of its thrilling development story. Nevertheless, though the consensus Avenue expectation is bullish, JPMorgan analysts warned concerning the potential unsustainability of Robinhood’s development expectations.
Because of this, traders ought to monitor how the inventory performs this 12 months earlier than investing long-term in HOOD shares. The following few quarters might be thrilling to look at.
Technical overview: Robinhood inventory worth predictions for Q3 2021
Technically, Robinhood shares appear to have just lately bounced off a key help degree within the hourly chart. Because of this, the HOOD inventory worth has rallied to keep away from dropping to oversold situations of the 14-hour RSI.
Nevertheless, it’s but to hit the overbought ranges of the power index indicator, leaving extra room for upward motion. Due to this fact, traders can goal short-term income at roughly $47.25 or larger at $51.14. However, the important thing help ranges are $42.06 or decrease at $37.77.
Backside line: the case for purchasing Robinhood shares brief time period
Though Robinhood shares appear steeply valued based mostly on the ahead P/E ratio, the latest earnings beat and the present upward momentum appear poised to spice up the bull run.
Furthermore, the inventory worth is much from reaching overbought situations, leaving room for extra features. Due to this fact, traders can goal HOOD’s short-term features whereas monitoring its development prospects versus precise ends in the approaching quarters to find out the correct time to promote.
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