Robinhood Is One of the Worst-Performing Stocks in the S&P 500 This Year. Is It Overdue for a Rally?

The stock market has been off to a poor start to 2026, with the S&P 500 falling sharply to end last week, and now it's down around 7%. It's a brutal performance, but there are many stocks that have been doing even worse.

Robinhood (NASDAQ: HOOD)'s stock has already fallen 42% through just the first three months of the year. And over the past 12 months, its valuation has been cut in half, easily making it one of the worst-performing stocks on the entire S&P 500 index during that stretch.

Could the stock be heading even lower, or has the market been too harsh on Robinhood, and is it overdue for a big rally?

Image source: Getty Images.

Why is Robinhood's stock struggling?

Robinhood has generally been a popular stock with retail investors. Its user base is fairly young, it allows crypto trading on its platform, it has launched prediction markets, and it has also been pushing the envelope with innovation, such as offering stock tokens in the European Union.

Despite the seemingly endless opportunities in the market, however, the stock has been nosediving this year. That could be due to a number of factors, including its valuation being fairly high, plus competition appearing to ramp up, particularly in the prediction markets. The market may be worried about whether the stock's feverish and impressive growth can continue. The company's revenue rose by 52% last year, but over just the last three months of 2025, its top line increased at a slower rate of 27%. There may also be growing concern that, if economic conditions worsen, retail investors will trade less, further weighing down its numbers in future quarters.

Should you buy the dip?

Robinhood's growth has been impressive in recent years, and it still has plenty of room to grow further, with new opportunities in prediction markets proving especially attractive. The sell-off in its share price this year has also made it a more attractive buy -- the stock is now trading at 32 times its trailing earnings, down from well over 60 several months earlier. And the consensus analyst price target for the stock is $117.48 (as of March 30), implying an upside of around 78% in just the short term.

The stock hasn't been this cheap since May, and while there may continue to be some short-term volatility in its price, its future remains bright. A rally may not be coming just yet, but if you're willing to hang on amid the current adversity in the market, Robinhood can be an excellent growth stock to simply buy and hold.

David Jagielski, CPA 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.