The Trump era sees a rise in "speculation fever," with the stock price of "American influencer brokerage" Robinhood soaring 450% in a year

Since Donald Trump won the election last November, the stock trading platform Robinhood Markets' stock price has soared about 450%. It has become the company with the largest increase among companies with a market value of $10 billion before the 2024 election. During the same period, the S&P 500 index only rose by 17%.

According to Bloomberg data, Robinhood's current valuation has reached 62 times its future earnings, far exceeding the average level of 22 times for similar platforms. Such a high valuation has made it a market focus, and any performance that falls short of expectations could trigger a significant stock price correction.

As investors' concerns about overvalued stocks grow, the market is closely watching Robinhood's earnings report results, which will be released on Wednesday local time. Analysts generally believe that the company needs to deliver results far exceeding expectations to support the current stock price level.

Policy Dividends Drive Performance Growth

Several policies from the Trump administration have brought benefits to Robinhood. The president signed an executive order supporting the cryptocurrency industry, expanded the government's use of digital assets, and legalized stablecoins. These measures directly boosted the platform's cryptocurrency trading volume.

In April of this year, the trading volume of stocks on the Robinhood platform surged 123% compared to the same period last year. The increase in market volatility has created more profit opportunities for such retail trading platforms.

In addition to the impact of policies, traders are chasing emerging popular stocks and buying heavily into unprofitable tech company stocks, further boosting the platform's trading activity. Eric Clark, Chief Investment Officer of Accuvest Global Advisors, stated:

"The market has generally become more like a casino, and Robinhood is a direct beneficiary of this market environment."

Business Expansion Aiming for Diversification

Robinhood is transforming from a stock trading platform into a one-stop financial services platform, with its latest expansion efforts including entering the global prediction market.

Neil Sipes, an analyst at Bloomberg Intelligence, stated that investors will focus on the effectiveness of these expansion efforts when interpreting Wednesday's earnings report, particularly the performance of emerging revenue sources and recently launched products.

During the 2024 presidential election, betting activity in prediction markets surged, with platforms like Kalshi and Polymarket facilitating billions of dollars in election outcome bets. Robinhood sees this as a source of growth, although this expansion blurs the lines between financial markets and the gambling industry.

High Valuation Faces Tests

Despite its impressive performance, Robinhood still needs to address market concerns about its stock being overvalued. On Tuesday, risk assets fell, and Wall Street executives reignited cautious sentiment in the market regarding high valuations.

Charles Bendit of Rothschild & Co Redburn stated:

"Robinhood performs well in product execution, but we are concerned that its fundamentals reflect strong cyclicality, while the valuation suggests that the business has yet to prove its cross-cycle durability."

Jay Woods, Chief Market Strategist at Freedom Capital Markets, believes the key question is "how much expectation has already been reflected in the stock price?" He pointed out:

"To achieve the next round of gains, they need to deliver significantly better-than-market performance."