This S&P 500 Newcomer Rocketed 237% Since Its 2021 IPO - And Wall Street Says It’s Still a Buy Today

Wall Street's latest darling just shattered expectations—posting a staggering 237% surge since its 2021 market debut. Now analysts are doubling down, calling it a must-buy despite traditional finance's usual skepticism toward disruptors.

Breaking the Mold

This isn't your grandfather's blue-chip stock. While legacy institutions were busy debating inflation prints, this company quietly redefined growth metrics—delivering returns that make even the most bullish crypto rallies look tame.

The Institutional Stamp

Landing an S&P 500 spot isn't just about numbers—it's about credibility. This admission signals mainstream acceptance, yet the stock maintains its explosive momentum. Talk about having your cake and eating it too.

Why the Street Can't Look Away

Analysts see more runway ahead. The 237% climb? Just the warm-up act. Fundamentals remain strong, innovation continues unabated, and frankly—traditional portfolios could use this kind of adrenaline shot.

Finance's worst kept secret? Sometimes the 'experts' actually get it right. Even a broken clock is right twice a day—but this time, they might actually be early.

Image source: Getty Images.

Taking stock

Investing was once the domain of the rich and famous, but over the past few decades, retail investors have come into their own. Stocks no longer trade in blocks of 100, commissions on trades have largely vanished, and investing platforms are easily accessible to anyone with an internet connection.

That's where Robinhood comes in. The company was founded on the idea that "everyone should be welcome to participate in our financial system." The platform's digitally native design, ease of use, and near-universal accessibility have fueled Robinhood's quick ascent, as the company now commands roughly 6.5% of the overall market, according to CSI Market, despite competition from larger, well-heeled rivals.

Robinhood has laid out a three-pronged strategy for driving growth. The company's trading platform covers equities, options, cryptocurrency, prediction markets, index options, and futures trading, thereby attracting active traders. It's also focused on earning more of each user's wallet share. Finally, Robinhood is expanding the breadth of its financial ecosystem, adding new features, products, and services.

The numbers tell the tale

Robinhood's most recent results suggest this strategy is paying off. In the second quarter, revenue grew 45% year over year to $989 million, resulting in a 100% surge in earnings per share (EPS) to $0.42.

The results were driven higher by transaction-based revenue that jumped 65% to $539 million, fueling average revenue per user (ARPU) that increased 34% to $151.

Underpinning the financial results were equally robust operational metrics:

• Robinhood's funded customer base increased to 26.5 million, up 10% year over year.
• Subscribers to Robinhood Gold, its premium tier, soared 76%.
• Total platform assets reached $279 billion, a 99% surge.
• Net deposits of $13.8 billion climbed 4%.

The success of software-as-a-service (SaaS) companies -- including Robinhood -- is often measured using the Rule of 40, which gauges the balance between revenue growth and profitability. Any number above 40% is considered healthy, so Robinhood's score of 112% is excellent.

The fintech company continues to expand its financial services offerings, as well as its geographical footprint, which helps to highlight the reach of Robinhood's future growth opportunities.

Wall Street is bullish

Robinhood stock has surged 497% over the past year, but Wall Street remains bullish. Of the 23 analysts that covered the stock thus far in September, 14 rate it a buy or strong buy, 7 label it a hold, and two hold a rating of underperform.

Bernstein analyst Gautam Chhugani is among the most bullish, maintaining a buy rating and $160 price target on the stock, which suggests additional upside of 36% for investors, compared to the stock's closing price on Wednesday.

The analyst says the company has built the best "mousetrap" with its trading business and is "building the most evolved multi-asset financial super-app, leveraging technology." The analyst goes on to say that he believes Robinhood will evolve into a financial services leader for the "new generation."

Robinhood stock appears exorbitantly expensive at first glance, selling for 55 times next year's earnings and 22 times next year's sales. This helps to illustrate a common conundrum, as the most commonly used valuation metrics struggle to adequately value high-growth companies, and Robinhood is no different. However, when measured using the more appropriate price/earnings-to-growth (PEG) ratio, the multiple comes in at 0.34, and any number less than 1 is the standard for an undervalued stock.

Given its three-pronged growth strategy, strong execution, and Wall Street's bullish take, I WOULD submit that Robinhood stock is a buy ahead of its admission to the S&P 500.