HOOD stock price was in a free fall on Thursday, even after the fintech giant published strong financial results.
Summary
- HOOD shares dropped after the company published strong earnings.
- The decline was due to the weakness in the stock market.
- It had formed a double-top and a bearish divergence before earnings.
Robinhood shares dropped after strong earnings
At last check on Thursday, Robinhood shares fell to about $131, down by 8% over the past 24 hours. Its market cap currently hovers at around $117 billion, down from the all-time high of $137 billion.
Robinhood stock plunged even after the company published strong financial results. These numbers showed that it continued to grow across all the important metrics.
Revenue jumped by 100% to $1.27 billion as the number of active customers soared to 26.8 million. Most notably, the revenue growth was driven by its cryptocurrency business, which includes Bitstamp, the exchange it bought earlier this year.
The company also benefited from the ongoing asset growth and interest rates. Its assets jumped to $333 billion, helping it make over $450 million in net interest income. Year to date, the stock price is up more than 232%.
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HOOD isn’t alone. The Dow Jones and the Nasdaq 100 indices fell by over 400 points, with most of their constituent companies being in the red.
The stock also likely dropped as investors sold after earnings news, since it had been hovering near its all-time high. It is the best-performing company in the S&P 500 Index this year as it jumped by over 240%. It is common for an asset to retreat after good news if market participants have already priced it in.
Additionally, there are concerns about its valuation, which has increased substantially. The company trades at a premium valuation, with a forward price-to-earnings ratio of 79, above the sector median of 11. Its forward price-to-earnings-to-growth ratio is rising to 3.26. Therefore, the stock is likely going through a valuation reset.
HOOD stock price formed a risky pattern
Robinhood stock chart | Source: TradingView
Technicals also explain why the Robinhood stock price plunged after earnings. The daily chart shows that the stock formed a double-top pattern at around $153 and a neckline at $120. This pattern often leads to a strong bearish breakout.
At the same time, it formed a bearish divergence pattern as the Relative Strength Index and the Percentage Price Oscillator moved downwards. Therefore, the most likely HOOD forecast is that it continues to fall as sellers target the neckline at $120. A move above the double-top point at $153 will invalidate the bearish outlook.
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