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.
Sign up for Kiplinger’s Free E-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
-
How to Rank Your Financial PrioritiesCircumstances are different for everyone, but this adviser with 20-plus years of experience shares some insights on getting your financial priorities in order.
-
Can You Define Baby Boomers? Look at Trump and HarrisTrump and Harris are bookends of the sprawling Baby Boomer generation, which spans 18 years. No wonder they have different world views.
-
How to Rank Your Financial Priorities
Circumstances are different for everyone, but this adviser with 20-plus years of experience shares some insights on getting your financial priorities in order.
-
Medicare or Medicare Advantage: Which Is Right for You?From overall costs to availability of care, here's what to know about the differences between traditional Medicare and Medicare Advantage plans.
-
Wealth Is More Than Just Your Money: How to Manage It AllIn addition to handling your financial wealth, consider ways to manage your non-financial assets: health, knowledge, time and relationships.
-
Stock Market Today: Stocks Hit Fresh Highs on Bank Earnings, Econ NewsStrong corporate profits and benign economic data once again sent equities to record levels.
-
You're 60 Years Old With $1 Million Saved: Can You Retire?The answer depends on several factors. The key is to create a plan that combines all aspects of retirement — income, taxes, health care and legacy planning.
-
Are You a Danger When You Drive?You might be shaking your head no, but read on for the five things that most of us have at some point done, or are doing, that could cause an accident.
-
Stock Market Today: Markets Slip on Hot Inflation Print, Layoff NewsEconomic data continues to complicate expectations for Federal Reserve rate cuts.
-
CPI Report Points to Gradual Pace for Rate Cuts: What the Experts Are SayingCPI Inflation surprised to the upside last month but the disinflation trend remains on track.
