Roaring Kitty returns to live streaming: Time to buy Robinhood stock?

On June 6th, Keith Gill, better known as “Roaring Kitty,” revealed he will be returning to live streaming after a hiatus of more than three years. This announcement led to a significant surge in GameStop’s stock, which rose by 47.45% on Thursday. Gill, whose bullish views and posts about GameStop were instrumental in the 2021 meme stock frenzy, has rekindled interest in the video game retailer, driving its stock to new highs.

Ready for Kitty’s Return: Robinhood CEO

Adding to the excitement, Robinhood Markets Inc. (NASDAQ:HOOD) CEO Vlad Tenev assured investors that the trading platform is fully prepared for the anticipated surge in trading volume linked to Roaring Kitty’s return. Tenev highlighted the significant infrastructure improvements and the launch of 24-hour market trading, which allows customers to trade stocks at any time of day, five days a week.

Financial performance and analysts’ views

Robinhood has been making headlines not just for its readiness for increased trading activity but also for its robust financial performance and strategic initiatives. The company’s Q1 2024 earnings report revealed impressive growth, with net revenue soaring to $618 million, surpassing Wall Street’s expectations.

This growth was largely driven by a surge in cryptocurrency trading, which accounted for $126 million of the transaction-based revenue, up 232% year-over-year.

Analysts have been optimistic about Robinhood’s future. Bank of America recently issued a double-upgrade, moving the stock from Underperform to Buy, citing rising retail engagement, organic growth, and improved operating efficiency.

The analyst Craig Siegenthaler raised the price target to $24, highlighting the company’s attractive valuation and positive operating leverage following significant expense reductions.

Acquisition and strategic moves

Robinhood’s strategic moves also include its recent acquisition of Bitstamp, a global cryptocurrency exchange, for approximately $200 million. This acquisition aims to accelerate Robinhood’s international expansion and diversify its business by adding institutional customers.

In addition to expanding its crypto offerings, Robinhood is set to support ether (ETH) exchange-traded funds (ETFs) in both its brokerage and retirement accounts. This development, coupled with the launch of Robinhood Gold credit cards, which offer substantial benefits and have attracted over a million customers, underscores the company’s focus on diversifying its product offerings and enhancing customer engagement.

Despite these positive developments, Robinhood faces potential regulatory challenges, particularly in its cryptocurrency business. The SEC’s recent scrutiny over the classification of crypto assets poses a risk, but Robinhood’s conservative approach to its crypto offerings has been seen as a mitigating factor by some analysts.

Overall, Robinhood’s strong financial performance, strategic acquisitions, and product diversification paint a promising picture for the future. As we await Roaring Kitty’s highly anticipated livestream, the spotlight on Robinhood’s stock intensifies. So, let’s see what the charts have to say about the stock’s price trajectory going forward.

Break of near-term resistance will push it to $36

Robinhood’s stock has had a very interesting journey so far. After making its debut in July 2021, it soared quickly to make a high at $85 and then saw a strong downtrend over the next year that saw it crashing more than 90% and making a low at $6.84 in June 2022.  Following that it traded in a confined $8-$14 trading range for more than one and a half years, breaking out of it on the upside in February this year.

HOOD chart by TradingView

Investors who are bullish on the stock need to be vigilant here as it is trading very near to the 78.6% Fibonacci retracement at $23.57 from its all-time high and all-time low. If the stock manages to give a closing above this near-term resistance, bullish investors can take a long position here with a stop loss near the recent swing low at $16.2. If the stock successfully manages to cross that level, it can fly all the way up to $36.70 where one can book profits.

Traders who are bearish on the stock must refrain from shorting it at current levels as the stock is showing strong bullish momentum. However, a short position can be initiated if the stock falls below $19.6 with a stop loss at $22.6. Breaking below $19.6, the stock can cater all the way down to $14 where bearish traders can book profits.