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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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
-
S&P 500 Slips Ahead of Fed Week: Stock Market TodayAll eyes are on the Federal Reserve ahead of next week's critical policy meeting.
-
September Fed Meeting: Live Updates and CommentaryThe September Fed meeting is a key economic event, with Wall Street keyed into what Fed Chair Powell & Co. will do about interest rates.
-
I'm an Investment Strategist: This Is How the Fed's Next Rate Move Could Impact Your WalletInterest rate cuts might be coming, which could affect everything from your credit card debt to your mortgage. It's smart to prepare now — here's how.
-
I'm a Retirement Planner: These Are Three Common Tax Mistakes You Could Be Making With Your InvestmentsDon't pay more tax on your investments than you need to. You can keep more money in your pocket (or for retirement) by avoiding these three common mistakes.
-
Want to Shave 10 Hours Off Your Workweek? A Startup Expert Shows How AI Can HelpArtificial intelligence is overhauling how companies operate, freeing up entrepreneurs and their workers to skip the menial stuff and get down to business.
-
Dow Gains 617 Points as Rate Cuts Near: Stock Market TodayWednesday's economic data didn't shift Wall Street's expectations that the Fed is preparing for a rate cut at next week's meeting.
-
Hot August CPI Report Doesn't Shift the Rate-Cut Needle: What the Experts SayThe August CPI came in higher than forecast on a monthly basis, but Wall Street still expects a rate cut at next week's Fed meeting.
-
Four Clever and Tax-Efficient Ways to Ditch Concentrated Stock Holdings, From a Financial PlannerHolding too much of one company's stock can put your financial future at risk. Here are four ways you can strategically unwind such positions without triggering a massive tax bill.
