Robinhood shares climb premarket as Bank of America upgrades rating

Investing.com -- Shares in Robinhood (NASDAQ:HOOD) rose by more than 5% in premarket U.S. trading on Friday after analysts at Bank of America Securities upgraded their rating of the trading platform operator.

In a note improving their outlook to "Buy" from "underperform," the BofA analysts said they have seen rising engagement from retail investors and "accelerating organic growth" at Robinhood, adding that the firm's valuation is "attractive" in the wake of elevated quarterly earnings.

Last week, Robinhood, whose services allowed many investors stuck at home during the COVID-19 pandemic to make commission-free wagers that fueled a surge in so-called "meme" stocks in 2021, posted first-quarter earnings per share and net revenues that topped estimates thanks in large part to strong cryptocurrency trading volumes.

"Retail engagement peaked in 2021 and then declined significantly through the [greater than] 500 [basis points] of Fed[eral Reserve] rate hikes and the 2022 bear market, troughing in 2023," the BofA analysts said. "However, following the emergence of a new bull market last year, we have monitored a rebound in multiple metrics at Robinhood [...] and we expect this to continue through 2026."

Separately, the BofA analysts also upgraded their rating of crypto exchange Coinbase (NASDAQ:COIN) to "Neutral" from "Underperform," citing cost-cutting measures and a "positive" macroeconomic environment for trading in digital assets.