Robinhood Markets (HOOD 0.82%) has gone from upstart to industry disruptor to industry heavyweight in a very short period of time. The company's success has been rewarded on Wall Street with a swiftly rising stock price. The stock is up more than 200% since its 2021 initial public offering. That said, the shares have fallen 30% from their 52-week highs. Should you buy the stock while the shares are trading below $150?
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Robinhood has achieved a lot
Robinhood has basically tapped into younger investors who are used to living in the digital world. It basically started as an app, using gamification to keep its customers engaged. Some of the broker's early efforts have been left behind, noting that investing probably shouldn't be treated as a game. However, the biggest lingering impact Robinhood has had is on commissions.
Robinhood was the company that, effectively, forced the rest of the discount broker industry to lower trading costs to zero, or close to it. It was a huge shift in the industry business model. However, with customers flocking to free trading on the Robinhood platform, competitors like Charles Schwab (SCHW 0.13%) didn't really have a choice.
That isn't the only big move Robinhood has made. To keep pace with its customers, the broker has also begun offering crypto trading and, more recently, sports betting. One can debate whether either of these offerings should be described as investing, but it is clear that Robinhood customers appreciate these services.
To put some numbers on that, Robinhood's funded customer count rose from 24.3 million in the third quarter of 2024 to 26.8 million in the third quarter of 2025. More impressive is that the total assets on its platform increased to $333 billion in the third quarter of 2025 from $152 billion a year earlier. Customers clearly like what Robinhood is offering and are rewarding it with their patronage and cash.
Even after the drop, Robinhood is expensive
It makes sense that investors have been excited about Robinhood stock. The gain from the initial public offering (IPO) is proof of that. The recent pullback, however, has to be taken with a grain of salt. At the high, the stock's valuation was extreme, sitting at a price-to-earnings (P/E) ratio of nearly 70 times. The 30% price decline since that high-water mark has brought the P/E down to 44 times.
The 44 times P/E is lower, but it is still twice the roughly 22 times P/E of competitor Charles Schwab. It is also higher than Interactive Brokers (IBKR +0.12%), which has a P/E ratio of 35 times. Robinhood is growing, but the premium valuation may not be worth the risk, even after the stock pullback.
NASDAQ: HOOD
Key Data Points
What investors should be worried about is exactly what made Robinhood so successful. It has attracted a lot of customers in a very short period of time. And more importantly, the customers it has attracted appear to be risk takers. The move into sports betting highlights that. There hasn't been a deep bear market or severe recession since the 2007-2009 Great Recession. In fact, the company hasn't operated as a public company through any recessions at all. There's no way to know how its business will hold up.
Robinhood could fall further than you expect
Big market and economic downturns have historically left young, aggressive investors shell-shocked. The reaction is often to simply cut and run, pulling whatever money is left out of the market, sometimes for good. If that situation were to repeat itself, the growth trend that Robinhood has benefited from could turn into a rapid decline in assets and customers. Given Robinhood's above-peer valuation, Wall Street's view of the stock could easily get even more negative than it is now when a bear market or recession comes along.
