‘Monster of a crypto cycle’ to send Robinhood stock up 83%, Bernstein says

Robinhood’s crypto push will catapult its market cap to about $26 billion in 2025, up from $16 billion today.

That’s according to Bernstein analysts, who initiated coverage on the stock today with an “outperform” rating.

They predict the trading app will “ride the crypto comeback” and enjoy a stock surge from $16.39, its closing price on March 12, to $30 in 2025.

Robinhood’s “full suite crypto offering within a regulated broker platform is in a sweet spot, given its captive base of 11 million active traders, with a strong fit to trade crypto — young, active, self-directed,” Gautam Chhugani and Mahika Sapra, analysts at research firm Bernstein, wrote in the Thursday report.

The bullish prediction is another sign that not only do market watchers expect the current rally to continue, but that non-crypto native players on Wall Street and fintech firms will play an increasingly big role in that rally.

The news comes as Bitcoin soared past a new record high of $73,000 this week.

In the same period, the total value of the crypto market will surge from $2.6 trillion to $7.5 trillion, the analysts added.

“The buy-side and sell-side alike, refuse to see what we see — a monster of a crypto cycle over 2024-25,” Bernstein wrote.

Robinhood’s crypto push

“We want to be kind of the on-ramp to the crypto world,” Johann Kerbrat, the general manager of Robinhood’s crypto arm, told DL News in an interview in December.

Robinhood has launched several initiatives to reach that goal.

For instance, it recently launched a crypto trading service in the European Union, and expanded its crypto wallet with an Arbitrum add-on.

The company’s crypto arm drove its growth in the last quarter of 2023, with its cryptocurrency revenue surging to $43 million of the company’s total $200 million in transaction-based revenue.

But that’s just the beginning, according to Bernstein.

Robinhood should expect “revenues to double over the next two years, with more than 70% of growth coming from crypto transaction revenues,” the analysts said.

Crypto will drive transaction revenues back to 63% of Robinhood’s total revenues, with crypto going from about 17% of transaction revenues in 2023 to around 60% by 2025, Bernstein wrote.

Robinhood versus crypto exchanges

Robinhood has two advantages over crypto exchanges, Bernstein said.

The first is its higher number of users — 11 million compared to Coinbase’s seven million — who “are likely to trade crypto as the crypto cycle hits mainstream institutional adoption,” Bernstein said.

The second relates to Robinhood’s so-called payments-for-order-flow model, which is what it charges to route trades to a market maker. That pricing “leads to superior execution price versus Coinbase,” with spreads of 35 basis points versus 150, or 1.5%, for those of Coinbase, Chhugani and Sapra said.

To be sure, crypto competitors are ahead on crypto native offerings and have more than 200 listed tokens, and “are an established venue for crypto token traders,” Bernstein said.

At the same time, traditional broker platforms remain “shy to offer crypto” and fintech firms like PayPal only offer “a plain vanilla ‘access/on-ramp’ product at higher pricing,” Bernstein said.

Robinhood did not return a request for comment.

Eric Johansson is DL News’ news editor. Got a tip? Email him at eric@dlnews.com.