How Robinhood's dive into stock tokens makes it a 'must own' crypto investment

By James RogersThe financial-services platform is making a smart move by getting deeper into cryptocurrencies, analysts say, as it will expand its customer baseShares of Robinhood Markets Inc. continued their rocket ride on Tuesday, as analysts said the launch of U.S. stock and ETF tokens for customers in the European Union was a smart move that will expand the reach of the financial-services platform.At a launch event Monday, Robinhood (HOOD) said that European customers will have access to more than 200 U.S. stock and ETF tokens, as well as private companies SpaceX and OpenAI. These companies do not trade on the stock market, although some funds, such as the publicly traded Destiny Tech100 Inc. DXYZ fund, offer investors exposure to them. The two companies are also part of ARK Invest's ARK Venture Fund.The move should help Robinhood penetrate markets outside the U.S., according to Cantor Fitzgerald analyst Brett Knoblauch."Our main takeaway from the event is that [Robinhood] is getting much deeper into crypto, with new product launches providing meaningful revenue and earnings runway in the future," he wrote. "We remain convinced that [Robinhood] is a must-own name in the sector."Robinhood's stock shot up 5% in morning trading after running up 12.8% on Monday. That put it on track for its 12th record close over the past month.Referring to the SpaceX and OpenAI stock tokens, Knoblauch noted that private company investing has historically been reserved for high-net-worth individuals and institutions."[Robinhood] will look to democratize access to private capital by utilizing blockchain infrastructure to tokenize shares in private companies," he added.Cantor reiterated its overweight rating for Robinhood's stock and raised its price target to $100 from $89, citing a higher target multiple applied to the company's shares and its product road map.KeyBanc Capital Markets said that the stock-token launch - as well as the expansion of Robinhood's crypto trading coverage across the entire E.U. and the European Economic Area of Iceland, Liechtenstein and Norway - helps expand the company's total addressable market. KeyBanc Capital Markets reiterated its overweight rating for Robinhood and raised its price target to $110 from $60.Of 24 analysts surveyed by FactSet, 17 have an overweight or buy rating, six have a hold rating, and one has a sell rating for Robinhood.Speaking during Monday's launch event, Robinhood Chief Executive Vlad Tenev explained how the company's stock tokenization works.He said that if a customer in the E.U. wanted to buy a tokenized stock, of say, Apple Inc. (AAPL), that order would be sent to the company's back end and then transmitted to a U.S.-based broker-dealer. The broker-dealer would then buy a traditional share from what Tenev described as a "TradFi market," such as a market maker or an exchange like the NYSE or the Nasdaq.That share is then transmitted back to the U.S. broker and held in custody in traditional form. It is then sent to what Robinhood calls its "tokenization engine."The Robinhood chief said that for every share purchased from the TradFi market, one token is being minted, which represents the exposure to the share. The token is then transmitted back to the customer."When you want to sell these shares, the process goes in reverse," Tenev added. Robinhood instructs the introducing broker to sell the underlying share in the open market. Then the company burns the token and gives the proceeds to the user.While Robinhood's move has generated plenty of buzz, Cantor's Knoblauch says that we are unlikely to see Robinhood extend stock tokenization to U.S. customers anytime soon."We see real headwinds to implementation when it comes to tokenized equities and tokenized private equity, as the framework is simply not in place for that to happen yet," he said.Shares of Robinhood have rocketed 163.7% just halfway through 2025, after soaring 192.5% in 2024. The S&P 500 index's SPX has gained 5.4% so far this year.-James RogersThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.