Perform Discount Cashflow Analysis

Let's do a DCF for Robinhood!

Current FCF: $4.5B (up 833%... insane)

Expected Growth rate: 30%

• This was very hard to nail down.

• FCF (as you can see in the chart above) has been all over the place

• Substituting revenue growth, which has grown from $1.09B -> $4.5B in 4 years (34.53% CAGR)

Discount rate: 5%

• Fed just announced a rate cut, but I'm going to keep it at 5% given the uncertainty in current macro environment

Which yields:

Link if you want to use this spread sheet

So, my terminal value is $853B. Applying a 30% margin of safety, gives me a $597B intrinsic value for $HOOD (current market cap is $105B... implying a 5x upside)

This is a low confidence valuation, because assuming 30% FCF growth is insane, but I do think their innovation velocity is accelerating rapidly, and I like the way the business is trending.

With a 15% growth rate assumption, we get a $275B valuation pre-margin of safety ($192B with MOS)

Am I going to buy more?

... not yet, but I just have a huge mental block of buying something after a huge run-up. I am watching closely for shares to go on sale.

Sentiment: Bullish.