Robinhood MarketsHOOD

We expect revenue to grow from $5.0B in FY2026 to $10.2B in FY2031 (~15% CAGR), with EPS growing from $1.85 to $5.36 (~24% CAGR). New products like the Gold Credit Card and retirement accounts are deepening customer relationships and increasing the total assets held on the platform. The cost of running the app and clearing trades stays relatively flat while the company earns more interest and fees from a growing user base. EPS grows faster than revenue because the company is using its high cash flow to buy back shares while profit margins continue to climb. Operating margin expected to reach ~50% by FY2031.

Retirement accounts capture hundreds of billions in legacy rollovers. If Robinhood wins even a small slice of the trillions in 401(k) rollovers, its assets under custody will triple.

Gold Credit Card becomes a primary daily spending tool. A successful card launch creates high switching costs and generates recurring interchange fees that don't depend on market volatility.

International expansion replicates the US low-cost trading model. Taking the efficient Robinhood platform to the UK and Europe opens a massive new market with less sophisticated competition.

Falling interest rates sharply reduce net interest income. A large portion of current profit comes from earning interest on customer cash, which would shrink if the Fed cuts rates.

Regulatory changes ban or limit payment for order flow. If the SEC bans the fees Robinhood gets from market makers, the company would have to charge for trades or lose revenue.

Major security breach erodes trust in the digital-only model. For a company that wants to be a "financial home," any loss of customer data or funds would be a permanent brand killer.

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We use a 5-year Discounted Cash Flow (DCF) with a dual terminal value approach to determine the fair value. This framework fits Robinhood because it captures the company's fundamental shift from a transaction-heavy startup to a profitable "super-app" with diverse cash flow streams. A DCF is more effective than a static P/E multiple here because it can model the long-term margin expansion expected as the company scales its higher-margin subscription and lending products.

The fair value is calculated as the sum of the $11.2 billion present value of 5-year cash flows and an $81 billion terminal value, net of debt. Our terminal multiple of 30x sits between legacy brokers like Charles Schwab (22x) and high-growth fintech peers like Coinbase (38x); this positioning reflects Robinhood's superior growth profile compared to incumbents, balanced against its remaining exposure to volatile crypto cycles. The calculation uses the FY2027 EPS projection of $2.53 as the primary basis for the terminal value bridge, discounted back at a 10% WACC to reflect the stock's current risk profile.

Cross-checked with a Forward P/E approach (FY2027 EPS of $2.53 multiplied by a 40x peer-anchored multiple), we get a fair value of $101. This is within 2% of our $103 DCF result, which strongly confirms the valuation. The 40x multiple is slightly below SoFi's 45x but above Coinbase's 38x, which is appropriate given Robinhood’s accelerating GAAP profitability and its unique position at the intersection of traditional brokerage, crypto, and digital banking.

We're assuming Robinhood Gold subscribers reach 6.5 million by FY2028, up from the current 4.3 million. This growth is underpinned by high-value incentives like the 3% credit card cash-back and IRA match, which are currently the most aggressive in the retail sector and are effectively "buying" high-quality, long-term assets.

We're assuming the company successfully diversifies its revenue mix so that transaction fees fall to 55% of the total by FY2029. While transaction revenue is currently 89% of the mix, the scaling of the Gold credit card, Sage Home Loans partnership, and the Legend professional trading platform provides a clear path toward more stable, recurring income streams.

We're assuming Net Interest Revenue (NII) remains resilient despite a moderating interest rate environment. This assumption relies on continued growth in Net Deposits, which recently grew at a 22% annualized rate, offsetting the impact of narrower spreads as the Fed begins to normalize rates toward a mid-cycle target.

The biggest risk is a sharp decline in retail trading activity occurring simultaneously with a rapid interest rate cutting cycle. This combination would hit Robinhood's two largest profit drivers at once, potentially pulling the FY2027 EPS estimate from $2.53 down to $1.80. Such a contraction would likely knock roughly $29 off our per-share fair value as the market re-rates the stock toward legacy brokerage multiples. Watch for any move in monthly transaction revenue below $180 million as an early warning signal.