On Thursday, KeyBanc Capital Markets updated its financial model for Robinhood Markets (NASDAQ:), citing an increase in the shares price target. The target has been raised to $22.00 from the previous $15.00, while the firm maintained an Overweight rating on the shares.
The adjustment comes as KeyBanc incorporates recent disclosures from Robinhood and estimates from KeyBanc itself as the quarter comes to a close. The revised forecast for fiscal year 2024 transaction revenue is based on expected growth in equity, option contract, and cryptocurrency volumes of 25%, 14%, and 83% quarter-over-quarter, respectively. These projections are supported by Robinhood’s monthly metrics and third-party data for March, alongside stable rebate levels.
KeyBanc also revised its net interest revenue expectations upward, primarily due to an anticipated increase in interest-earning balances. Additionally, projections for the company’s top-line revenue in fiscal year 2025 have been adjusted upwards for similar reasons.
The firm’s analysis suggests that the majority of the increased revenue forecast for fiscal year 2024 will contribute to operating profit, with a smaller proportion of the revenue upside in fiscal year 2025 being allocated to operating profit due to expected investments in new and emerging products.
The new price target of $22 is based on a multiple of 19.5 times the forecasted adjusted EBITDA for fiscal year 2024. This valuation represents a discount compared to the median multiple of 22.6 times the adjusted EBITDA for the calendar year 2024 of a selected group of financial technology peers. The revised target reflects KeyBanc’s confidence in Robinhood’s revenue growth and aligns the stock’s valuation more closely with that of its industry counterparts.
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