Robinhood (NASDAQ:) Markets shares rose more than 3% in premarket trading Wednesday after the brokerage unveiled plans for a stock buyback program.
The company’s board of directors has greenlit a buyback program allowing Robinhood to buy back up to $1 billion of its outstanding Class A common stock.
“Using market close share prices, this would mean the company could repurchase around 49 million shares, or 6% of shares outstanding,” Barclays analysts said in a note.
This move should happen over the next two to three years, starting in the third quarter of 2024. It is important to note that the buyback plan does not have a set expiration date.
“Today’s news is a step for the company in addressing its high share issue, which could provide support from a valuation perspective over time,” Barclays continued.
“In our view, Robinhood combines “fintech” and “finance.” Financial stocks tend to trade on P/E ratios, while fintech companies tend to trade on gross margin or EBITDA multiples.”
HOOD stock is up more than 60% this year, significantly outperforming the broader market.