HOOD Forensic Analysis

BUYConviction: 9/10Price: $106.9910-Q
Loading technical data...

Price Targets (12m)

Bull Case
$145.00
+35.5% from current
Base Case
$130.00
+21.5% from current
Bear Case
$95.00
-11.2% from current

PART 1: TRADING EXECUTION

Trading Setup & Entry Strategy

Action: AGGRESSIVE ACCUMULATION (BUY) ON SUPPORT TEST

We are looking at a classic "Bull Market Pullback" scenario. HOOD has corrected ~15-18% from recent highs and is approaching the critical "Institution Defense Line" (200-Day SMA). Fundamentals are hyper-growth (100% YoY revenue), while Technicals are short-term oversold. This is the asymmetry you want.

  • •Entry Zone: $103.50 - $105.50.
    • •Reasoning: The 200-Day SMA sits at $103.44. We front-run this level. The RSI is 34.18; waiting for it to tap 30 (Oversold) often aligns with this price level.
  • •Position Sizing: 4% of Portfolio (High Conviction).
  • •Scaling Strategy:
    1. •Starter (40%): Market Buy at current ~$106.99 to capture immediate oversold bounce.
    2. •Aggressive Add (60%): Limit orders at $103.80 (just above SMA200).
  • •Stop Loss: $98.50 (HARD).
    • •Reasoning: If HOOD closes below the 200-day SMA ($103.44) and breaks psychological $100 support, the long-term trend is damaged. Do not catch the falling knife below $100.
  • •Take Profit:
    • •TP1: $118.00 (Test of 50-Day SMA resistance).
    • •TP2: $130.00 (Recent swing highs/Bollinger Upper Band).
  • •Risk/Reward: 1:4.2 (Risk ~$5, Reward ~$21).
  • •Max Hold: 3-6 Weeks (Swing to trend resumption).

PART 2: DETAILED RESEARCH

Executive Summary

Thesis: HOOD has evolved from a meme-stock casino into a diversified financial powerhouse. With 100% YoY revenue growth and 271% Net Income growth in Q3 2025, the fundamentals are screaming BUY. The current technical pullback (Price < SMA50, RSI 34) contradicts the fundamental explosion, creating a "dislocation" opportunity. We are buying a high-growth compounder at long-term trend support.

Analysis Date: 2026-01-28 | Price: $106.99

Recent Material Events (8-K Analysis)

  • •Bitstamp Acquisition (Jun 2025): Closed. Global crypto footprint established. Now fully integrating institutional/retail crypto in EU/UK.
  • •TradePMR Acquisition (Feb 2025): Closed. This is critical—it moves HOOD into the RIA (Registered Investment Advisor) custodial space, making assets stickier and less dependent on retail trading volume.
  • •Debt Refinancing (Mar 2025): Expanded credit facilities to $3.7B+, securing liquidity for further M&A.

Insider Trading Activity

  • •Signal: NEUTRAL/CAUTIOUS.
  • •Activity: Executives (Tenev, Bhatt, Warnick) have been selling via 10b5-1 plans. While expected after a run-up from 2024 levels, the volume of selling warrants a strict stop-loss. They are monetizing the 100% revenue growth; we must respect price action if $100 breaks.

Current News & Market Context

  • •Regulatory Tailwind: The GENIUS Act (signed July 2025) and CLARITY Act (passed House) provide a regulatory moat for HOOD's crypto expansion. The threat of SEC enforcement regarding crypto-securities has diminished significantly.
  • •Macro: Interest rates are stabilizing. While HOOD earns less on cash sweep if rates drop, their transaction volume (Crypto + Options) has exploded to offset this. The market is pricing HOOD as a growth tech stock, not just an interest-rate play.

Financial Health & Business Model

Q3 2025 Financials are Exceptional:

  • •Total Net Revenues: $1.27B (+100% YoY). This is not a drill; the company doubled size.
  • •Net Income: $556M (+271% YoY). Margins are expanding rapidly.
  • •Transaction-Based Revenue: $730M (+129%). Crypto revenue up 339% ($268M). Options revenue up 50% ($304M).
  • •AUC (Assets Under Custody): $332.7B (+119% YoY). The platform is attracting massive inflows ($20.4B Net Deposits in Q3 alone).

Valuation Analysis

  • •Implied Growth: Current price implies ~30-35% growth. Actual growth is 100%. The stock is fundamentally cheap relative to its growth rate (PEG < 0.8).
  • •Reverse DCF: At $106.99, the market expects cash flows to grow at 22% for the next 5 years. With recent acquisitions (Bitstamp/TradePMR) and crypto deregulation, HOOD is outpacing this comfortably.

Forensic Accounting Flags ⚠️

  • •SBC (Share-Based Comp): $78M in Q3 2025 vs $79M in Q3 2024. Positive Divergence: Revenue doubled, but SBC remained flat. Dilution risk is decreasing significantly as a % of revenue.
  • •Revenue Quality: Transaction rebates (PFOF/Crypto) are high, but "Gold" subscription revenue grew 68%. Quality is improving, though still dependent on market volatility.

Technical Analysis & Trade Timing

  • •Trend: BEARISH_CROSSING (Short-term) in BULL TREND (Long-term).
  • •RSI (14): 34.18. Approaching oversold. In a strong uptrend, RSI 30-35 is the "Buy Zone."
  • •Moving Averages:
    • •Price ($106.99) is significantly below SMA50 ($118.32) -> Short term weakness.
    • •Price is hovering above SMA200 ($103.44) -> Long term support.
  • •The "Value Trap" Check: Fundamentals are accelerating, not deteriorating. This is a correction, not a death cross. SMA50 is still above SMA200 (Golden Cross remains active).

Short-Term Trading Strategy (2-5 Days)

  • •Timeframe: SWING_1_2_WEEKS
  • •Setup: The stock has dropped ~9% in 20 days. It is due for a mean-reversion bounce to the SMA10 ($108) or SMA50 ($118).
  • •Execution:
    • •Enter 30% now ($106.99).
    • •Place limit orders for 70% at $103.80 to catch a wick down to the 200-day.
    • •If RSI hits <30, double position size.

Investment Recommendation

RATING: BUY (High Conviction Swing)

This is a textbook Techno-Fundamental divergence. The business is firing on all cylinders (Record Revenue/Profit), but the stock is selling off due to technical exhaustion and insider selling. We are buying the dip at the 200-day moving average, creating a highly asymmetrical trade setup. Do not hold below $100.

One-Liner Thesis: HOOD has successfully pivoted from a retail casino to a global financial super-app with 100% growth, yet the stock trades at a technical discount right on top of major institutional support.