Robinhood Markets, Inc. (HOOD) stock intrinsic value fair value estimate & owner earnings analysis

Robinhood runs a commission-free retail investing platform in the United States: stocks, options, crypto and event contracts. It earns money two ways. In 2025 transaction revenue was $2.6 billion, mostly from routing customer orders (options, crypto and equities) to market makers, and net interest revenue was $1.1 billion, earned on customer cash, margin loans and securities lending. Total revenue was $4.5 billion, up from $3.0 billion in 2024. How we measure earnings. We start from cash from operations and strip out the swings in customer-related balance sheet items, which are large at a broker (receivables from users, payables to users, securities lent and borrowed) and say nothing about what shareholders can take out. We then deduct stock-based compensation as a real cost ($305 million in 2025) and only the part of capital spending needed to stay in place (about $13 million of $54 million in 2025). On that basis earnings per diluted share were about $1.30 in 2024 and $2.45 in 2025. In 2021 through 2023 they were negative, mainly because of very large stock awards after the 2021 listing ($1.6 billion in 2021, $871 million in 2023) and lower trading activity in 2022, when revenue fell 25%. Cash spent on acquisitions ($399 million in 2025) is not deducted; it is discretionary and we do not credit any growth from it. Starting level. Only two years of positive earnings on this basis exist, both in a strong period for options, crypto and interest income, so we do not treat the 2025 figure as normal. The base case starts from $1.30 per share, the 2024 result. The first half of 2026 supports that level: net income of $911 million versus $722 million a year earlier and revenue up about 24%. Year-one growth in the base case is zero, below the +89% actually achieved in 2025, because the 2025 jump rode on rising crypto and options volumes and interest income that the company itself says would fall with Federal Reserve rate cuts. Base case ($14.60 per share). Earnings stay at $1.30 per share for 15 years, then fade to zero over the following 10 years. We credit no growth: growth in customers and in newer products such as prediction markets depends on share gains and new products, which have not yet been demonstrated through a downturn. What we do credit is the existing platform, which has produced positive earnings in each of the last two years. We fade it after 15 years rather than assume permanence because nothing in the filings shows how long this earning power lasts. Bull case ($27.50). Earnings hold at the 2025 level of $2.45 per share for 15 years and then fade over 10 years, that is, the business simply keeps doing what it did in 2025 with stock compensation held near $305 million. No further growth is assumed. Bear case ($2.80). A repeat of the 2022 pattern: retail trading activity drops, and the Federal Reserve cuts rates, which the company states would reduce its net interest revenue (about a quarter of revenue). Earnings fall to $0.30 per share for 10 years, then fade to zero over the next 10. Stock compensation, which has stayed near $300 million a year, does not shrink with revenue, which is why the downside is severe. What would make this wrong. To the upside, if 2025-level earnings prove to be a durable base rather than a peak. To the downside, if trading volumes or interest margins compress by more than the 2022 experience. Crypto trading is a meaningful part of transaction revenue but the company is a broad brokerage, not primarily a crypto business. Margin-of-safety price ($5.00): about one-third of base value. Earnings depend on market activity and interest rates, the record is short and only two years profitable, so a wide margin of safety is required.