Is Robinhood Stock a Buy About a Third Below Its Record High?
Key Points
Robinhood has been a driving force for change in the discount broker industry.
Wall Street is affording the stock a premium valuation even after the shares have lost more than a third of their value.
Robinhood (NASDAQ: HOOD) basically forced its competitors in the discount brokerage industry to adopt free trading. And it has pushed quickly into new areas, such as cryptocurrencies and prediction markets. While this has allowed Robinhood to grow materially and meet its customers' demands, it has kept pressure on peers such as Charles Schwab (NYSE: SCHW) and Interactive Brokers (NASDAQ: IBKR).
But that doesn't mean Robinhood is an attractive investment right now, even after it has lost more than a third of its value from its 2025 high. Here's why you might want to tread with caution.
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Robinhood remains relatively expensive
Robinhood hit its all-time high of around $152 per share in late 2025. It trades at around $97 as of this writing, a decline of roughly 35%. That's a sizable drop and much larger than the declines in Schwab or Interactive Brokers, which are down roughly 15% and 20%, respectively, from their recent highs. Based on the stock price moves, you might think that this is a value opportunity.
The problem is that Robinhood's price-to-earnings ratio is around 42x. That's still much higher than its competitors, with Schwab at 16x and Interactive Brokers at 31x. Value investors probably won't be interested in Robinhood. And growth investors should probably tread with caution as well.
Robinhood's customers are new and untested
To be fair to Robinhood, the company has experienced rapid growth and managed that growth very well. As noted, it helped transform the discount brokerage industry with its free-trading model. However, the company only went public in 2021. It hasn't been public through a truly deep market downturn, like the Great Recession or the dot-com crash.
Meanwhile, Robinhood specifically attempts to attract customers who are new to investing, as it looks to "democratize finance for all." That's a laudable goal, but it also means that its customers haven't been tested by a deep and prolonged bear market, either. And the company has been growing in high-risk areas, such as the aforementioned cryptocurrencies and prediction markets.
Younger, risk-taking customers may be shocked by a long-lived and painful market downturn. And that could lead them to exit the markets, perhaps permanently, as they watch their savings vanish. If they are using leverage, which has been a growing part of Robinhood's business (margin balances rose 127% year over year in the second quarter of 2026), they may have no choice but to sell.
Robinhood has done a great job of growing its business, and it is highly likely to survive any market downturn it faces. But the premium it is being afforded relative to peers, even after a deep drawdown, should probably keep most investors on the sidelines until the company and its customers have faced a test on the scale of the Great Recession or the dot-com bubble.
Charles Schwab is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Interactive Brokers Group. The Motley Fool recommends Charles Schwab and Robinhood Markets and recommends the following options: long January 2027 $43.75 calls on Interactive Brokers Group, short January 2027 $46.25 calls on Interactive Brokers Group, and short September 2026 $95 calls on Charles Schwab. The Motley Fool has a disclosure policy.