HOOD stock fell sharply on Thursday even after the fintech giant reported strong financial results.
summary
- HOOD stock fell after the company announced strong financial results.
- The cause of the decline was a slump in the stock market.
- Before the earnings call, it had formed a double top and a bearish divergence.
Robinhood stock falls after strong results
At last check on Thursday, Robinhood stock had fallen to around $131, down 8% in the past 24 hours. The company's market capitalization currently hovers around $117 billion, down from its all-time high of $137 billion.
Robinhood shares plummeted even after the company announced strong financial results. These numbers show continued growth across all key metrics.
Revenue increased 100% to $1.27 billion as the number of active customers surged to 26.8 million. Most notably, revenue growth was driven by its crypto business, which includes exchange Bitstamp, which it acquired earlier this year.
The company also benefited from continued asset growth and interest rates. Assets soared to $333 billion, with net interest income of over $450 million. Year-to-date, the stock is up more than 232%.
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Hood is not alone. The Dow Jones and Nasdaq 100 indexes fell more than 400 points, with most of their constituents in the red.
In addition, the stock price was hovering near its all-time high, so it is likely that the stock price fell as investors sold off the stock following the announcement of the financial results. The company has soared more than 240%, making it the best-performing company on the S&P 500 this year. It is common for assets to retreat after good news if market participants have already priced it in.
Furthermore, there is concern that the valuation has increased significantly. The company trades at a premium valuation of 79 times forward earnings, above the sector median of 11 times. The company's expected price/earnings ratio has risen to 3.26 times. Therefore, the stock may be experiencing a valuation reset.
HOOD stock has formed a dangerous pattern
Robinhood Stock Chart |Source: TradingView
Technical analysis also explains why Robinhood's stock price plummeted after the earnings call. The daily chart shows the stock forming a double top pattern around $153 and a neckline at $120. This pattern often leads to a strong bearish breakout.
At the same time, the relative strength index and the percentage price oscillator formed a bearish divergence pattern as they fell. Therefore, the most likely prediction for HOOD is that the decline continues as sellers target the $120 neckline. The bearish outlook will be invalidated above the double top point of $153.
read more: Today's Crypto Crash: Why Did Bitcoin and Altcoins Fall?
