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
-
Are COVID Shots Still Covered By Medicare?Getting the new COVID-19 vaccine covered by Medicare isn't as easy this year as it was in the past. Here's what you need to know before you take a trip to your pharmacy.
-
How Digital Platforms Are Changing the Way You Invest in GoldInvesting in gold is easier than ever thanks to digital platforms. Learn how online tools are lowering costs, increasing transparency and making gold accessible to all investors.
-
How Digital Platforms Are Changing the Way You Invest in Gold
Investing in gold is easier than ever thanks to digital platforms. Learn how online tools are lowering costs, increasing transparency and making gold accessible to all investors.
-
Stocks Rise to Start Fed Week: Stock Market TodayThe Nasdaq Composite and S&P 500 hit new record closing highs as Wall Street awaits the Fed's next rate cut.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary FormsStandard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams NowBeyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
One Small Step for Your Money, One Giant Leap for RetirementSaving enough for retirement can sound as daunting as walking on the moon. But what would your future look like if you took one small step toward it this year?
-
This Is What You Really Need to Know About Medicare, From a Financial ExpertHealth care costs are a significant retirement expense, and Medicare offers essential but complex coverage that requires careful planning. Here's how to navigate Medicare's various parts, enrollment periods and income-based costs.
-
I'm a Financial Planner: Could Partial Retirement Be the Right Move for You?Many Americans close to retirement are questioning whether they should take the full leap into retirement or continue to work part-time.
