Hightower's Stephanie Link cautions against buying Robinhood stock: 'it's super expensive'

Shares of Robinhood Markets Inc (NASDAQ: HOOD) traded as high as $85 Wednesday morning as the company appears to be solidifying itself as a “meme stock”. But investors looking to buy Robinhood stock after its 80% surge may want to reconsider, at least according to Hightower’s Stephanie Link.

Robinhood stock is ‘super expensive’

Robinhood’s core business generates revenue from routing its users' buy and sell orders to market makers -- known as order flow. But taking a look at the company’s second quarter report shows this business was down 23% compared to the first quarter, Link said on CNBC’s “Squawk Box.” But at the same time, total revenue was up 5% to 10%.

This means that Robinhood’s fast-growing crypto exchange business is offsetting revenue declines elsewhere.

However, Robinhood’s stock is “super expensive” at 11 times price to sales, she said. This implies a premium versus rival broker Charles Schwab Corporation (NYSE: SCHW) that trades at seven-times price to sales.

Her comments were made during Wednesday’s pre-market session when Robinhood’s stock was trading above the $50 mark.

Robinhood is a growth story, not a valuation story

Compared to Schwab, Robinhood’s business model is “not as diversified,” Link continued. Also, Robinhood’s two founders Vlad Tenev and Baiju Bhatt collectively hold 67% of the total voting rights and this represents a “yellow flag.” Meanwhile, it is unclear if Robinhood’s core market of retail investors reached a peak. She said:

Link said she does not own shares of Robinhood but she is a holder of E*Trade’s parent company Morgan Stanley (NYSE: MS). This gives Link exposure to a more diversified financial services enterprise.