Robinhood Stock Is Up 1,000% Over the Past 3 Years. Is Its Run Finally Over?

The market has been in strong bull shape over the past few years, driven by artificial intelligence (AI). But AI stocks aren't the only game in town these days. Robinhood Markets (NASDAQ: HOOD) has been crushing the market, up more than 1,000% over the past three years. The financial disruptor is attracting new clients and benefiting from high trading activity, and it's expanding its platform to monetize its market and create long-term opportunities.

However, Robinhood stock started to slide last week. Is the tide turning, or is this an opportunity to buy on a short-term dip? Let's see what's happening.

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The financial stock of the moment

Robinhood redefined retail investing when it debuted as a trading platform. It offers free trades and makes money in other ways, such as payment for order flow. It has attracted millions of customers for the financial freedom this offers, and other trading platforms have followed suit.

As the market emerged from lows in 2022, Robinhood began to pick up speed, both as a company and a stock. Since trading is the company's bread and butter, a strong bull market is a huge tailwind. This has resulted in incredible growth.

The 2025 third quarter is a snapshot in time, but it's a good example of how things have been going in general. Revenue doubled year over year to $1.3 billion, and net income was up 271% to $556 million. It added 2.5 million customers, a 10% increase, to end the quarter with 26.8 million.

Multiple growth drivers include the new customers, more fund deposits, higher trading activity, new products, and new gold members. Customers pay a $50 annual fee for Gold membership, which comes with perks like cash back and matching retirement funds. However, the biggest growth driver has been cryptocurrency trading, with stock valuation expansions not too far behind. Total platform assets increased 119% year over year in the third quarter, with a 162% increase in cryptocurrency valuation and a 91% increase in equity valuations.

Long-term opportunities

As the company onboards new customers and more upgrade to Gold membership, Robinhood has tremendous long-term opportunities. It's adding new products and entering new markets at a rapid pace, cementing its position as a full financial company.

While some of its new products are still some of the more risky types the company is known for, it's also adding more traditional ones like credit cards and savings accounts. That introduces more stability into the platform and reduces some of the risk of investing in a company that's reliant on cryptocurrency trading to generate revenue.

The company recently launched prediction markets, a fancy way of saying online betting. It rolled out before the presidential election, and volume has doubled every quarter since.

Risk and valuation

Robinhood has been on a roll, but there may be some holes in the investing thesis, and some of them are getting bigger as the market starts to teeter.

Its model, as it stands right now, relies heavily on trading activity to boost revenue. That's swell in the kind of bull market that has propped up the S&P 500 (SNPINDEX: ^GSPC) 72% over the past three years. But investors have become more wary about an AI bubble, and the S&P 500 has started to come down. There's no way to know if that will continue, or if it will go back up this week and reach new records. But if there is a correction on the way, that could impede Robinhood's future growth.

Its model is also open to competition; it doesn't have a strong moat that makes it challenging for other companies to offer the same services.

Another risk is the company's concentration in riskier services, like cryptocurrency trading and online betting.

Finally, the stock is expensive. It trades at a P/E ratio of 45 and a price-to-sales ratio of 23. To sustain these levels, it needs to keep cranking out solid results. As soon as there's a crack in the thesis, which investors seem to be contemplating, the stock is likely to drop. And as investors worry about how much higher the stock market can go in the near term, Robinhood stock is more susceptible to a fall.

Robinhood could have a great future, but now may not be the best time to buy the stock.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.