HOOD’s stock price went into freefall on Thursday even after the fintech giant posted strong financial results.
Summary
- HOOD shares fell after the company posted strong earnings results.
- The decline was due to weakness in the stock market.
- It had formed a double top and a bearish divergence before earnings.
Robinhood shares fell after strong earnings results
At last check on Thursday, Robinhood shares were down to around $131, down 8% in the past 24 hours. Its market cap currently hovers around $117 billion, down from its all-time high of $137 billion.
Shares of Robinhood tumbled even after the company posted strong financial results. These figures showed that growth continued to increase across all key metrics.
Gain jumped by 100% to $1.27 billion, while the number of active customers rose to 26.8 million. Notably, revenue growth was driven by its cryptocurrency business, including Bitstamp, the exchange it bought earlier this year.
The company also benefited from continued asset and interest rate growth. Assets rose to $333 billion, giving the company more than $450 million in net interest income. Year to date, the stock price is up more than 232%.
HOOD is not alone. The Dow Jones and Nasdaq 100 indexes fell more than 400 points, with most of their constituent companies in the red.
The stock also likely fell as investors sold on earnings news, as it hovered near its all-time high. It is the best performing company in the S&P 500 Index this year, up more than 240%. It is common for an asset to pull back on good news when market participants have already priced it in.
In addition, there are concerns about its valuation, which has increased significantly. The company trades at a premium valuation, with a forward price-to-earnings ratio of 79, above the industry average of 11. The forward price-to-earnings ratio rises to 3.26. Therefore, the stock is likely undergoing a valuation reset.
HOOD’s stock price formed a risky pattern
Technical data also explains why Robinhood’s stock price fell after the earnings report. The daily chart shows that the stock formed a double top pattern around $153 and a neckline at $120. This pattern often leads to a strong bearish breakout.
At the same time, it formed a bearish divergence pattern as the Relative Strength Index and the Percentage Price Oscillator moved lower. Therefore, the most likely HOOD prediction is that it will continue to decline as sellers target the $120 neckline. A move above the double top at $153 will invalidate the bearish outlook.
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