The S&P 500 continues to soar as 2026 gets started, but not all of your favorite stocks are driving it forward. Consider Robinhood Markets (HOOD 3.20%), which more than tripled last year but has declined almost 18% during the past three months.
Is that an inauspicious start to the year? Or is it just a break before it climbs higher? Let's take a look at what's happening at the trading platform and where it might be in five years.
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What's so great about Robinhood?
Robinhood stock soared last year, finishing up a three-year growth streak of 1,140%. That's an amazing return for investors who bought at the right time.
The company's core product is its commission-free trading platform, which began with stocks but now includes options and cryptocurrencies. Robinhood originally gained fame as the home of the meme stock frenzy that sent GameStop and AMC to heights before they came back down, but it has emerged from that period as a solid business attracting millions of customers.
It has also expanded beyond trading into more traditional financial services like credit cards and bank accounts, and it's adding new products and regions at a fast pace. As a trading platform, it's benefiting from the strong bull market that has propelled the market 74% higher during the past three years. In the 2025 third quarter, revenue doubled from a year earlier to $1.3 billion.
While no one can ever predict the future, some companies have simple retail models and consistent growth drivers, making it easier to at least make a solid guess about where it could be going. Robinhood, though, is in a different category, because it depends on strong trading activity to keep growing. So rather than guess where it will be in five years, I'm going to go through two potential scenarios.
Scenario No. 1
In the first scenario, Robinhood continues to enjoy elevated trading activity and the revenue and profit that comes with it. The market continues to climb, and excited investors continue to flock to Robinhood's platform to benefit from market gains. That results in continued high gains and profits.
Robinhood keeps launching new products, attracting a more balanced consumer base that's looking for excellent financial products that offer digital access and innovations with real value. Funded customers increased 10% year over year in the third quarter to 26.8 million. That's not a huge increase or consumer base. With more traditional financial products, Robinhood's platform could be more appealing to a wider audience, and with a full ecosystem, it could cross-sell its products and accelerate growth.
In five years, Robinhood could be offering many banking services in addition to trading products, and if the market keeps going higher, it's likely to as well. For example, even if revenue growth slows to a compound annual growth rate of 50% during the next five years, Robinhood would have $31.8 billion in trailing-12-month revenue, nearly eight times today's number. And even if you cut the price-to-sales (P/S) ratio in half, the stock would increase fourfold under that assumption.
NASDAQ: HOOD
Key Data Points
Scenario No. 2
In the second scenario, the market crashes or declines, and Robinhood's business slows. In another version, cryptocurrencies continue to decline in value, and that's enough to seriously hurt the business. In fact, that's what's been happening during the past few weeks. Cryptocurrency has become a major source of revenue for Robinhood, and cryptocurrency trading revenue increased 300% to $268 million in the third quarter, or almost a third of total transaction revenue. That's a lot of exposure to cryptocurrency. It also attracts a more risk-tolerant investor, which adds volatility to the platform.
During the next five years, if there's pressure in any of its markets, the business could sour pretty quickly. It's still building up its other financial services, but the platform as a whole attracts a certain type of investor, so that might not be enough to keep the boat steady.
Adding to that, Robinhood stock is expensive right now, trading at a price-to-earnings (P/E) ratio of 48 and a P/S ratio of 24. If growth decelerates, the stock won't justify this premium, and the shares would head down.
Is it worth the risk?
One thing in Robinhood's favor is that the market tends to rise more often than it falls, fueling growth for the trading platform. There's definitely reason for optimism down the line, especially as the company diversifies. But that could be much longer-term; if the market declines within the next few years, there could still be pressure.
If your risk tolerance is relatively high, Robinhood could end up being a star stock over many years. But if you're more conservative, you might want to look for a stock that has a more stable business model over the next five years.
