HOOD Stock Alert: The $1 Billion Reason Behind Robinhood’s Rise

Robinhood Markets (NASDAQ:HOOD) shares are rising in early trading after the financial services company announced yesterday that it will buy back $1 billion worth of its own stock. The news has HOOD shares trending on social media and financial news websites.

The details of Robinhood’s share buyback plan

The share buybacks are expected to begin next quarter and continue for two to three years. However, the company noted that the number of shares it will buy back in the final period will depend on “general business and market conditions, as well as alternative investment opportunities.” Robinhood noted that the value of HOOD stock will also play a role in determining the pace of the buybacks.

Robinhood said it decided to buy back its shares in part because revenue and profits were up. In the most recent quarter, the company’s revenue rose 40% to $618 million compared to the same period last year. In addition, net income was $157 million, compared to a loss of $511 million in the first quarter of 2023.

Robinhood added that the buybacks demonstrate its “confidence” in its “financial strength and future growth prospects.” The company noted that it also took the step to return value to its shareholders.

HOOD shares: Double upgrade by Bank of America

Robinhood shares have been relatively strong since mid-May, thanks at least in part to a rare double upgrade from a major bank.

Specifically, on May 17, Bank of America raised its rating on the name from “Underperform” to “Buy.” The bank believes the company benefits from improved user metrics, accelerating growth, higher margins, and an attractive valuation. The bank raised its price target on the shares from $14 to $24.

At the time of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies