Why Robinhood Stock Just Crashed

Robinhood Markets (NASDAQ: HOOD), the online brokerage that shook up stock market trading during the pandemic and has only grown stronger since, took a sudden turn for the worse Thursday, falling 9.5% through 12:45 p.m. on no obvious bad news.

No bad news for Robinhood specifically.

Image source: Getty Images.

What's ailing Robinhood today

There's plenty of other news afoot, though. Nvidia (NASDAQ: NVDA) reported a strong earnings and sales beat last night, raising guidance for the rest of the year and encouraging investors to believe the AI trade remains alive and well. Then, the U.S. Bureau of Labor Statistics announced this morning surprisingly strong job growth in September, with a long-awaited employment report showing 119,000 additions -- more than twice as many as economists had predicted.

An early surge of buying, however, has completely reversed in the afternoon, and the S&P 500 is now 0.8% in the red. Investors are worried: if great news from Nvidia and the government isn't enough to save this bull market, what can -- And if nothing can, will people continue to trade stocks and help Robinhood make money?

Adding to investor worries, market pundits are suggesting that a strong jobs report for September is the exact opposite thing you'd want to see if you hope the Federal Reserve will keep cutting interest rates to encourage job growth. If that growth is already happening after all, why cut rates?

Is Robinhood stock a buy?

And so investors are souring on Robinhood stock today. Worse, they might be right to do so.

Consider that at 49 times earnings, Robinhood stock already looked expensive relative to analyst forecasts for 22% long-term earnings growth. If growth ends up even slower than that, then Robinhood stock becomes even more expensive.

Far from a buying opportunity, now may be the time to sell.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.