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The Bitstamp acquisition is a strategic move by Robinhood to expand its crypto business, the report said.
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JMP said it doesn't expect material accretion from the deal.
The broker notes that Bitstamp, as one of the oldest exchanges that offers crypto, Robinhood has “stood the test of time over multiple cycles.”
Robinhood offers 15 cryptocurrencies to retail investors in the U.S. and more than 30 tokens in Europe, whereas Bitstamp lists over 85 tokens, the report said. By acquiring an exchange the trading platform can offer markets in a lot more tokens.
“With a full exchange, HOOD gets access to global liquidity, and thus can offer the liquidity to its own broker platform, potentially improving its economics,” analysts Gautam Chhugani and Mahika Sapra wrote.
Exchanges offer a wide range of services such as staking, stablecoins, trading, custody and prime broking, the note said. The acquisition of Bitstamp potentially allows Robinhood to offer a wider range of crypto products to a more institutional client base. Bernstein has an outperform rating on Robinhood stock with a $30 price target. The shares were little changed in early trading on Friday at around $23.
Broker JMP said the acquisition of Bitstamp will “drive opportunities to broaden Robinhood's participation in the evolving crypto value chain,” in a report on Thursday. Owning an exchange will give Robinhood opportunities to connect more deeply into the crypto ecosystem and could allow the platform to get more involved in the tokenization of assets and securities, the report said.
The acquisition will give Robinhood more exposure to institutional clients and will accelerate the company's buildout in Europe, the report added.
As Bitstamp is marginally profitable at best, JMP said it does not expect material accretion from the deal. JMP has an outperform rating on the stock with a $30 price target.
Read more: Robinhood Delivers Big Earnings Beat Driven by Booming Crypto Trading: Analysts