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- Robinhood Markets (NASDAQ:HOOD) stock climbed 4.9% in Friday premarket trading after Bank of America Securities bumped up its rating on the stock and crypto trading app to Buy from Underperform, a rare double-upgrade.
- "We view the current entry point as the opposite of 2021 when we initiated at Underperform after its IPO given: (1) rising retail engagement and accelerating organic growth; (2) positive operating leverage after large expense reductions; (3) attractive valuation following increases in EBITDA/EPS," analyst Craig Siegenthaler wrote in a note to clients.
- He lifted the price target on HOOD to $24 from $14. Due to improvements in operating efficiency, organic cost cuts, and product offerings, BofA now applies a 15x EBITDA multiple, which is near the low end of the range that Interactive Brokers (IBKR) and Charles Schwab (SCHW) trade at, he noted.
- While regulators may bring action against Robinhood (HOOD) for its crypto practices, the company's conservative crypto offering leads Siegenthaler to be less concerned about the potential outcome.
- BofA's Buy rating on HOOD contrasts with the SA Quant rating and the average Wall Street rating, both at Hold, and aligns with the average SA Analyst rating of Buy.