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Robinhood surges as much as 81% in second day of wild trading

Robinhood surges as much as 81% in second day of wild trading

04 Aug 2021

Baiju Bhatt (left) and Vlad Tenev, founders of the online brokerage Robinhood, walk along Wall Street after going public with an IPO earlier in the day on July 29, 2021 in New York City.

Spencer Platt | Getty Images

Robinhood shares soared again on Wednesday, extending a wild rally in the newly public stock trading app’s stock.

Shares of Robinhood touched $85 at one point on Wednesday, an 81% gain over Tuesday’s close and bringing its gain on the week to more than 140%.The stock was last up about 40% after being halted for volatility several times.

Robinhood’s stock is making up for its lackluster debut on the Nasdaq last week. The stock priced at $38 per share, the low end of its offering range. It opened at that price on Thursday but then fell 8% on its first day and had largely traded below that price, until Tuesday when it rallied more than 24%.

It is unclear exactly what is driving the stock higher on Wednesday; however, attention from popular investor Cathie Wood typically benefits growth stocks.

ARK Invest’s Wood purchased 89,622 shares of HOOD on Tuesday in ARK Fintech Innovation ETF, a position worth roughly $4.2 million based on Robinhood’s closing price of $46.80. This position adds to the approximately 3.15 million shares Wood has bought of Robinhood since the company’s debut last week.

“It looks like ARK Investments took a big stake and it would seem as though the retail traders are getting involved as well,” said John Heagerty of Atlantic Equities. Heagerty has an overweight rating on Robinhood and $65 per share price target.

“It’s not normal for a stock of that size to move quite that quickly. I think it would deter institutional investors,” added Heagerty, who still feels there is a lot of value in the platform Robinhood created.

Robinhood is also garnering attention from retail investors. Speculative activity has exploded this year as day traders in online chatrooms managed to create massive short squeezes in names like GameStop and AMC Entertainment, which inflicted huge pain for short sellers and jolted volatility in the overall market.

HOOD is the number one ticker on WallStreetBets tracker Swaggy Stocks, which indicates more than 700 mentions on the Reddit chat room.

“Unpopular opinion: Robinhood still has the best mobile interface,” one post with 4,600 interactions said.

“Its a payment for order flow story with crypto as kind of a kicker,” Stephanie Link, chief investment strategist at Hightower, told CNBC’s “Squawk Box” on Wednesday. “In their second quarter total revenues grew five to ten percent from the first quarter. Well if you look at payment for order flow data, that number actually fell 23% in the second quarter. So it tells me payment for order flow is very competitive but the crypto kicker is probably helping Robinhood and they’re probably gaining share.”

“All that being said, its super expensive. It’s hard to get your hands around the valuation at 11x price-to-sales,” Link added. Online brokerage Charles Schwab is trading at 7x.

HOOD was also a top traded stock on Fidelity on Tuesday.

Robinhood is a five-time CNBC Disruptor 50 company and topped this year’s list. Sign up for our weekly, original newsletter that offers a closer look at CNBC Disruptor 50 companies like Robinhood.