Lubin Investment · Blog

Should you buy Robinhood (HOOD) stock in 2026?

2026-07-15 ·

HOOD: see the full analysis on Lubin Investment

Robinhood passes 9 out of 10 criteria in my quality screen, with exceptional profitability and capital returns. But the stock trades at about 39 times the cash it generates each year, against a 16 times median for its sector, powered by enthusiasm around prediction markets and tokenized assets. Here is why a good business is not automatically a good deal at the current price.

The app that outlived its own reputation

Robinhood became known in 2021 for the wrong reasons: the GameStop saga, commission free trading that pulled in a generation of first time investors, and a platform accused of turning the stock market into a game. Five years later, the company has changed face. My quality screen now gives it 9 out of 10, a score few financial companies reach, driven by profitability and capital efficiency that have little left in common with the free trading app image it built its early reputation on.

But a good quality score says nothing about the price you pay to benefit from it. That is exactly the tension in this name: a company that checks nearly every financial box, at a price that does not check the prudence box.

Extraordinary profitability and capital efficiency

The number that jumps out: Robinhood's free cash flow margin reaches 58.7%. In other words, out of every $100 of revenue, nearly $59 ends up as cash genuinely available, once every bill is paid. That is an extraordinarily high level, one even the best software companies rarely exceed. Return on invested capital, what the company earns on every dollar actually deployed in the business, reaches 58.9%, another figure that puts Robinhood among the most capital efficient business models I track.

Revenue grows 32% per year on average, a rare growth pace for a company already established and profitable at this scale (a market cap close to $74 billion). The one small blemish in the numbers: share count is rising slightly, about 1.6% per year, mostly tied to employee stock compensation, a common tech industry practice that dilutes existing shareholders a little without being alarming at this level.

Where the growth is really coming from: prediction markets

The growth engine that surprised most in 2026 was not stocks or crypto, but prediction markets: contracts that let you bet on the outcome of a real world event (a Federal Reserve decision, a sports result, an election outcome), through a partnership with Kalshi. This segment hit record volumes in the first quarter of 2026 and has become the main driver of user engagement on the platform, in an industry some analysts project to reach $33 billion by 2030. Robinhood went further in July 2026, announcing a joint venture with Susquehanna, one of the world's largest market makers, to operate its own CFTC-licensed prediction market exchange and clearinghouse (CFTC being the US derivatives market regulator).

This is a bet on a new type of financial product, not just a new feature. If prediction markets become a mass-market product comparable to sports betting, Robinhood positions itself both as a distributor and as an infrastructure operator, a far more profitable position than the plain zero-commission stock brokerage the company built its initial reputation on.

The crypto bet: between proprietary blockchain and cooling volumes

Robinhood also launched its own public blockchain in 2026, Robinhood Chain, infrastructure built on Arbitrum technology (a technical layer that speeds up transactions on the Ethereum blockchain while staying compatible with its ecosystem). The goal: offer tokenized stocks, digital tokens that mirror the value of a real share and can trade on crypto platforms, including third-party wallets like Ledger or decentralized exchanges like Uniswap. For European investors, this mechanism even allows access to private companies like SpaceX or OpenAI through tokens backed by private shares, access normally reserved for institutional investors.

But this technology showcase hides a quieter setback: revenue from plain cryptocurrency trading fell 47% in the first quarter of 2026 compared with a year earlier. It is a reminder that a good part of Robinhood's crypto business remains highly sensitive to the market's speculative mood, unlike prediction markets, which so far appear less correlated to the boom and bust cycles typical of cryptocurrencies.

The price: a valuation that assumes everything keeps going well

To judge what the market pays for Robinhood, I look at P/FCF (price to free cash flow), the share price divided by the cash actually generated each year. At its current price of about $115, Robinhood trades at roughly 39 times its free cash flow. For comparison, the capital markets sector (brokers, exchanges, asset managers) shows a median valuation of about 16 times in the universe I track. Robinhood thus ranks in the most expensive quarter of its sector, a multiple nearly two and a half times the median.

Combining current profitability with conservative growth assumptions, my model puts Robinhood's reasonable buy price around $75.44. The stock therefore trades about 35% above that entry point. That is not an extreme overvaluation for a company growing at this pace, but it means the current price already prices in a good part of the promise (prediction markets, tokenized assets) with not much room left in case one of them disappoints.

Quality and price: two questions, two different answers

This is a textbook case for my method. Is it a good business? Without hesitation, yes: exceptional profitability, outstanding capital returns, fast growth, and a genuine ability to reinvent itself beyond its early image. Is it the right price today? Much less clear: at 39 times its generated cash, the stock leaves almost no margin of safety if one of the growth engines (prediction markets, tokenization) disappoints, or if the market's speculative appetite for these new products cools off the way it already has for plain crypto trading.

Robinhood reports second quarter results on July 29, 2026. Numbers to watch: whether prediction market volume momentum confirms the first quarter's acceleration, and whether the decline in crypto revenue has stabilized or keeps worsening.

How I am calling it

I never recommend a specific stock, but Robinhood is a good illustration of why I refuse to mix up quality and price. The company has genuinely transformed its business model since 2021, with numbers that justify a good score in my screen. But at 39 times free cash flow, against a sector median of 16 times, the market is already paying for a growth story that still needs to prove itself over several quarters, not just a recent momentum. I would rather keep watching this one and wait for the price to move closer to my estimate than pay such a large premium for a thesis that is still young.

FAQ

What is a prediction market?

A financial contract that lets you bet on the outcome of a real world event (a monetary policy decision, a sports result, an election outcome). Robinhood distributes these products through a partnership with Kalshi and plans to operate its own regulated exchange with Susquehanna.

What is a tokenized stock?

A digital token on a blockchain that mirrors the value of a real share and can trade on crypto platforms. Robinhood offers these through its own blockchain (Robinhood Chain), including for private companies like SpaceX, normally out of reach for retail investors.

Why did Robinhood's crypto revenue fall if the stock is doing well?

Plain cryptocurrency trading depends heavily on the market's speculative mood, which cooled in 2026. Robinhood's growth now comes more from prediction markets and tokenized assets than from plain crypto trading.

Should you buy Robinhood stock now?

My model puts the reasonable buy price around $75.44 against a share price around $115 in mid-July 2026, which leaves no margin of safety at the current price. This is not personalized investment advice, do your own research.

What is the main risk on this name?

A slowdown in enthusiasm for prediction markets or tokenized assets, or another crypto cycle downturn, could hit a valuation that currently assumes these growth engines keep accelerating.

HOOD: see the full analysis on Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).