What Happened?

Shares of financial services company Robinhood (NASDAQ:HOOD) jumped 8.1% in the morning session after the company announced its first-ever Investor Day event to be held on December 4, 2024. These sessions often provide a platform for management to communicate the company's strategies and vision more effectively with investors. In some cases, it also serves as an avenue to launch new products and share innovative ideas. Given the strong interest from retail investors in the company's fintech platform (including its stock trading app), the stock's reaction suggests optimism about the event. Notably, the company plans to share its vision for the next 10+ years, including plans to drive customer and shareholder value.

As a reminder, it was reported yesterday that Dan Gallagher, the company's (Robinhood) Chief Legal Officer, is a top candidate to head the SEC (Securities and Exchange Commission) if former President Donald Trump wins in the November 2024 election. Gallagher's experience could come in handy as the SEC enhances its oversight of the crypto space.

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What The Market Is Telling Us

Robinhood’s shares are very volatile and have had 28 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 27 days ago when the stock gained 5.2% as markets rebounded (Nasdaq up 1.8%, S&P 500 up 0.8%) after shaking off the initial negative reaction to the August inflation report by the Bureau of Labor Statistics. The report revealed that CPI (Consumer Price Index - a gauge of the average price consumers pay for goods and services) for the month of August 2024 came in line with expectations, growing 0.2% month on month.

A concerning aspect of the report lies in the core CPI (which excludes food and energy prices), which revealed a 0.3% increase from the previous month, slightly exceeding the expected 0.2%. Despite this, annual inflation seemed to be easing, rising by 2.5%, the lowest level since February 2021. The improved market sentiment suggests investors still very strongly believe that the Fed will cut rates later this month.

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. The result of lower interest rates, all else equal, is higher stock valuations. This is especially true for higher-growth stocks such as those in the technology sector, where the current value depends more on cash flows many years out in the future.

Robinhood is up 102% since the beginning of the year, and at $25.03 per share, has set a new 52-week high. Investors who bought $1,000 worth of Robinhood’s shares at the IPO in July 2021 would now be looking at an investment worth $717.98.

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