Robinhood Markets (HOOD 3.62%) shares have been on a strong upward trajectory this year, rising more than threefold since January. However, more recently, bullishness for the fintech's shares has cooled down. A week ago, the stock even experienced a moderate pullback, tumbling by a double-digit percentage.
While the market at large may have been bailing on Robinhood, one prominent growth investor saw the sell-off as an opportunity to buy the dip. During the sell-off, exchange-traded funds (ETFs) managed by Cathie Wood's asset management company, Ark Invest, purchased over $30 million worth of Robinhood shares.
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So, is this a sign to follow her lead, or should you still stick to the sidelines? It may all depend on your investment time horizon.
Ark Invest goes bottom-fishing as Robinhood sinks lower
On Dec. 10, Robinhood Markets made an unexpected announcement. The online brokerage and cryptocurrency trading platform's trading volumes during November were down substantially on a month-over-month basis.
Equity trading volumes fell 37%, while options and crypto trading volumes were down 28% and 12%, respectively. In terms of other metrics, declines were far more modest. For instance, total platform assets fell by only 5% between October and November. Net deposits and margin balances were up, albeit slightly.
Moreover, with the exception of crypto trading volumes, all of these metrics were up substantially on a year-over-year basis. Even so, with investors viewing these latest figures as a sign of slowing growth, it's no surprise that this announcement triggered such a bearish response from investors.
Of course, this news didn't scare off Cathie Wood and Ark Invest. As mentioned above, Ark Invest's ETFs increased their positions in Robinhood Markets. Following this recent round of bottom-fishing, the ARK Innovation ETF (ARKK 2.40%) now owns around $330 million worth of Robinhood shares, comprising 4.5% of the fund's assets, while the ARK Blockchain & Fintech Innovation ETF (ARKF 2.22%) now owns around $57.7 million worth of shares, making up 5.15% of its total assets.
A well-timed buy or a mere catching of a falling knife?
Only time will tell whether Wood smartly bought Robinhood while there was panic in the streets or she simply caught a falling knife. Shares have surged substantially in 2025, thanks to the company's rapid rise in revenue and earnings in recent quarters.
While pricey at nearly 50 times forward earnings, Robinhood's premium forward price-to-earnings (P/E) ratio is likely sustainable if high growth continues. However, if November's trading data is a prelude to an earnings growth slowdown, the stock may be in for a serious reversal within the next few quarters.
NASDAQ: HOOD
Key Data Points
Having said that, much suggests that last month's declines were an outlier driven by both the company's relatively strong trading volume levels during October and last month's crypto sell-off. Not only that, there are a few growth catalysts on tap that may help sustain high growth moving forward.
First, Robinhood continues to expand globally. The company just announced a pair of bolt-on acquisitions in Indonesia, and it could continue to use mergers and acquisitions as a way to scale up its business. Second, Robinhood is increasing its presence in the sports prediction markets space.
The verdict: piggyback or hold back?
It's unclear how Robinhood Markets' shares will perform in the near term. The stock surged when news of the company's sports prediction market expansion plans hit the market on Dec. 17, but shares have since slid back toward their prior price levels.
While uncertain, it's possible that shares could come under pressure next month if concerns about decreased volumes resurface ahead of Robinhood's release of December trading data. That said, over a longer time frame, this stock may have more room to run, despite a rich valuation.
All it will take is for Robinhood to continue crushing it on earnings. Sell-side analyst earnings estimates for 2026 range widely from $1.10 to $3.32 per share. If you're confident that Robinhood's prediction market pivot will pay off next year and that recent trading volumes were just short-term noise, piggybacking on Cathie Wood's latest headline-making trade could prove profitable.
