Growing competition in prediction markets could be weighing on the stock and its perceived growth opportunities.
The company’s revenue grew by 27% in its most recent quarter.
The stock remains a bit pricey, trading at 36 times its trailing earnings.
Robinhood Markets (NASDAQ: HOOD) is off to a disastrous start to 2026. Entering trading this week, the stock has lost one-third of its value as it has significantly underperformed the S&P 500, which is down just 2% by comparison.
This is a steep sell-off for what’s been an incredibly hot growth stock in recent years. What’s behind Robinhood’s awful performance in recent months, and could this be a great time to add the stock to your portfolio?
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Robinhood’s trading platform is a popular way for retail investors to trade cryptocurrencies, stocks, and also make bets in the prediction markets. For Robinhood, it’s the latter that is arguably the most compelling growth opportunity ahead. The company has been growing its prediction markets business, and last year, there were more than 12 billion event contracts traded on its platform.
However, as more companies enter the space and seek to capitalize on the excitement around prediction markets, Robinhood’s share of that pie may not be as large as investors have hoped. And that can be problematic for a fast-growing company such as Robinhood, which needs to maintain a high growth rate to ensure investors see enough upside to remain bullish on the growth stock. In its most recent quarter, for the last three months of 2025, the company’s net revenue rose by 27% to just under $1.3 billion.
Last year, Robinhood’s stock soared by more than 200%. And the year before that, it was up over 190%. Given just how fast and how quickly it has taken off in value, it may not be too surprising that the stock has been falling in 2026; a slowdown may have been inevitable. Many investors may have simply been cashing out amid such an impressive rally in recent years.
Currently, the stock is trading at a price-to-earnings multiple of 36, but that falls to 32 based on analyst expectations of future earnings. While it’s not a dirt cheap multiple, it may be a justifiable one for a business that’s growing at an impressive rate. The consensus analyst price target of around $120 suggests that the stock could rise by more than 60% from where it trades today.
If you’re a long-term investor, Robinhood stock may be worth buying on weakness today. Although it may face some challenges this year due to poor market conditions, with so much growth still ahead, it can be a great investment to add to your portfolio right now.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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