Why Robinhood Stock Plunged 24% in February

Robinhood Markets (NASDAQ: HOOD) stock lost 24% in February, according to data provided by S&P Global Market Intelligence. The company is highly exposed to changes in cryptocurrency, and its fourth-quarter earnings demonstrated the impact.

More than retail investing

Robinhood has expanded from a retail investing platform to offering options and cryptocurrency trading. But it's also moving beyond trading to providing a broad assortment of financial services, including credit cards and bank accounts.

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Cryptocurrency trading has had a major impact on its operating results, representing a large portion of its increases in the past. Recently, the market has soured on Bitcoin, and cryptocurrency trading is now having a negative impact on the results.

In the 2025 fourth quarter, revenue increased 27% year over year, a huge slowdown from previous quarters, with a 15% increase in transaction revenue. Cryptocurrency trading dragged it down, declining 38% from the prior year.

The company demonstrated deceleration in other areas, too, such as a 7% increase in funded customers and an 8% increase in investment accounts.

Robinhood Gold accounts are still demonstrating momentum, up 58% year over year to 4.2 million. That's an addition of 1.5 million new Gold members.

A large opportunity in disruptive finance

The company is working on its long-term strategy of having a financial super app with a complete suite of financial services available on its app. It's constantly launching new features and adding new products in new locations, and it has a long roadmap to reaching its goals. It recently opened its prediction markets segment, and it started offering money market funds to European Union customers. It has a 10-year goal of being the top platform for retail traders and the world's no. 1 financial ecosystem.

But as long as it's highly exposed to cryptocurrency and other alternative assets, like options trading, investors will see it as a risky play.

Part of the reason it fell so hard is that the stock's valuation was high, and it can't justify a premium when growth is slowing down and a major segment is declining. At today's price, it trades at a P/E ratio of 40 and a price-to-sales ratio of 17, which isn't cheap.

This may be an opportunity to buy on the dip for investors who have a high risk tolerance and believe in Robinhood's vision. But most investors should take a step back and wait for Robinhood to demonstrate greater stability before buying the stock.

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