Late Tuesday, Robinhood Markets (HOOD) said its board of directors approved a $1 billion share repurchase program, which has its shares trading cautiously higher in Wednesday's trading session.
Robinhood said it expects the share repurchases to take place over a two- to three-year period beginning in the third quarter of 2024. This will depend "on general business and market conditions, and alternative investment opportunities," the company said in a statement, adding that management "plans to vary the pace of capital deployment depending on share price."
"As our business and cash flow have continued to grow, we're excited to announce a $1 billion share repurchase program to return value to shareholders," said Jason Warnick, chief financial officer at Robinhood Markets.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The news comes just three weeks after Robinhood reported record first-quarter earnings results. Specifically, the company said revenue increased 40% year-over-year to $618 million and its earnings per share swung to 18 cents from a loss of 57 cents in the year-ago period.
The results blew past analysts' expectations and has led to a rally of more than 15% in the weeks since the release.
How will Robinhood's stock buyback impact investors?
Stock buybacks are another way for corporations to boost value for shareholders. As Kiplinger contributor Mark Hake explains in his piece on "What Is a Stock Buyback," a company "that buys back its shares will produce a higher stock price because as its shares count falls, it forces the price higher."
Hake goes on to explain "that effect produces more value for shareholders, as they pay no taxes on this unrealized gain (until they sell shares)."
Where does Robinhood stand with analysts?
Most analysts are on the sidelines when it comes to the financial services stock. According to S&P Global Market Intelligence, the consensus analyst target price for HOOD stock is $20.63, which is right around where the stock trades today. Meanwhile, the consensus recommendation on the online broker and trading platform is Hold.
Still, some analysts are starting to turn more bullish. BofA Securities, for instance, recently double-upgraded HOOD stock to Buy from Underperform (Sell).
BofA said rebounding retail engagement has benefitted multiple metrics for Robinhood, including account growth, margin loans and payment for order flow. The research firm adds that HOOD's operating leverage and free cash flow conversion are underappreciated by the market.
The group at BofA has a $24 price target on Robinhood, which represents implied upside of over 15% to current levels.
Related Content
-
How We Found This List of the Best REITs to Buy NowReal estate investment trusts, or REITs, are a special class of stocks that are known for their high dividend yields. Here's how to find the best ones to buy.
-
Stock Market Today: Stocks Enjoy a Fed Day Relief RallyThe question now is whether Jerome Powell and other policymakers can get the balance right given all the new noise.
-
The Best REITs to BuyReal estate investment trusts, or REITs, are a special class of stocks that are known for their high dividend yields. Here's how to find the best ones to buy.
-
Stock Market Today: Stocks Enjoy a Fed Day Relief RallyThe question now is whether Jerome Powell and other policymakers can get the balance right given all the new noise.
-
The Free-Lunch Strategy to Reduce Risk From Tech StocksA recent rout in tech stocks has some investors thinking more defensively. This "free-lunch portfolio" strategy can help.
-
Stock Market Today: Stocks Skid Into Another Risk-Off TurnThe promise of the AI revolution can't overcome flickering hopes for a "Fed put."
-
How to Survive Market Mayhem2025 is turning out to be a turbulent year for the market, but don't panic. Here are four ways investors can ride out the storm.
-
Alternative Investments Under Trump: What You Need to KnowAs access to alternative markets opens up, retail investors looking to enhance their long-term financial outcomes have more opportunities to carefully consider.
-
Beware of TV/Billboard Personal Injury Law Firms: Here's WhyIf you or someone you know is tempted to hire a so-called settlement mill to handle a personal injury case, here are some reasons to reconsider.
-
How Small Businesses Can Clear the Economic Hurdles AheadShifting rules on taxes, trade and regulation are creating uncertainty for SMBs. Owners can overcome that by focusing on efficiency, flexibility and investment.
