Robinhood (HOOD) went public in July. It was among the most hyped listings of 2021 but failed to live up to the expectations. The stock closed lower on its listing day despite pricing the IPO at the lower end. Is HOOD a good stock to buy now after the dismal IPO? While Jim Cramer and Cathie Wood find value in the stock, WallStreetBets traders don’t see it as a buy.
HOOD joined the long list of 2021 IPOs that failed to close above the issue price. While IPOs received a phenomenal response in 2020, their fortunes have nosedived in 2021. Along with a general pessimism towards growth names, investors have been getting wary of companies with exorbitant valuations.
Cathie Wood is buying HOOD stock.
Currently, Wood of ARK Invest is loading up on HOOD shares. ARK holds 3.15 million HOOD shares that are valued at around $115 million. She has bought the shares for multiple ETFs including the flagship ARK Innovation ETF (ARKK). Wood also bought Coinbase stock after its direct listing.
While Coinbase stock surged on its listing day, it fell afterward. Wood saw the fall as a buying opportunity and gradually added more Coinbase shares. That said, Coinbase stock still languishes below its reference price of $250. Wood is known to have conviction in the stocks she buys and backs them even if they fall.
However, she recently sold off many Chinese stocks amid the regulatory crackdown in China. Wood thinks that the crackdown will have a negative impact on Chinese companies' valuations.
Jim Cramer on HOOD stock
Cramer, the host of CNBC's Mad Money, is also bullish on HOOD stock and sees it as a buy. Cramer thinks that Robinhood’s foray into other businesses could take the stock higher. The company plans to enter several other verticals including IRA. However, some people think that diversification into these businesses won't be easy for Robinhood given its brand image as a “fun trading app.”
Will Robinhood get into buy-now-pay-later?
Cramer thinks that Robinhood might also enter into the BNPL (buy-now-pay-later) market. The BNPL market has been getting a lot of attention in 2021. Earlier in the year, Affirm was listed in a blockbuster IPO. However, the stock couldn't hold on to higher price levels and fell after the IPO.
Apple is also said to be targeting the BNPL market. Another booster for the industry came after Square said that it would acquire Australian BNPL company Afterpay for $29 billion. Cramer said that HOOD stock should also spike if the company acquires a BNPL company like Affirm. Affirm stock spiked on Aug. 2 amid optimism that it could be a takeover target.
WallStreetBets traders don't like Robinhood stock.
While the Robinhood app is very popular among retail traders, most WallStreetBets members don't like the stock. Robinhood earned the ire of Reddit traders after it restricted the trading in Reddit stocks like GameStop and AMC Entertainment. Retail traders suffered massive losses after the move and many of them drifted from Robinhood to other trading apps including SoFi.
Is HOOD a good stock to buy?
HOOD stock trades at premium valuations and the recent rise has been driven by speculations of it getting into other industries. However, the company faces several regulatory challenges. Also, Robinhood’s business model mainly revolves around earnings from order flow—a process that’s being scrutinized by the SEC. Overall, HOOD stock doesn't look like a good buy at these prices.