Hood Inventory: Time to Re-examine Robinhood?

Nevertheless, by this level, the GameStop quick squeeze was years in the past. I really even ranked Robinhood as one of many 2 finest funding apps for 2024. With this in thoughts, is it time to reexamine Hood inventory? Let’s dive in.

Hood Inventory: Final Three Quarters

To get an thought of whether or not Hood inventory is a purchase, the most typical first step is to look at its most up-to-date earnings studies. This allows you to know if the corporate is rising every quarter. 

• December 2023

• September 2023

• June 2023

So, Robinhood’s earnings hasn’t actually been rising on a quarterly foundation. The year-over-year comparisons look good at first. However, this can be a little deceptive as a result of 2022 wasn’t a very sturdy 12 months for Robinhood. It’s additionally price noting that Robinhood has not posted an annual revenue as a public firm (apart from eeking out a $7m acquire in 2020). 

In 2023, Robinhood posted an annual income of $1.87 billion. I haven’t actually been maintaining with Robinhood over the previous few years. However, that is truthfully smaller than I assumed it’d be. For instance, that is about $1 billion lower than the social media website Pinterest introduced in in 2023 ($3.06 billion). Up to now, nothing is tremendous spectacular about Hood inventory.

With that stated, I took a have a look at Robinhood’s most up-to-date earnings studies and located crucial takeaways. 

Robinhood’s Most Latest Earnings

Listed below are crucial takeaways from Robinhood’s final earnings report:

• Robinhood is concentrated on profitable the energetic dealer market, rising pockets share, and increasing internationally.

• Buying and selling market share was up 14% for equities and 19% for choices year-over-year. 

• Gold subscribers had been up 25% to 1.4 million and property beneath custody exceeded $100 billion, fueled by the power of our 27% natural development in web deposits. 

• Robinhood launched within the U.Okay. and crypto within the EU. 

There’s additionally the truth that we’re presently on the finish of a interval of rising curiosity. Trying ahead, buyers anticipate the Federal Reserve to even begin reducing charges as early as this 12 months. Robinhood views this as a tailwind for the corporate since decrease charges are likely to result in will increase in property, balances, and buying and selling.

That stated, to actually perceive Hood inventory, we have to look at its distinctive worth proposition and distinctive danger. This may assist me paint an image of whether or not Hood inventory is a purchase or a promote proper now.

Robinhood’s Distinctive Worth Prop: Wonderful UI

One factor that separates Robinhood from each different funding brokerage is its person interface. I’ve used nearly each main inventory investing platform on the market. Robinhood blows all of them out of the water. It’s simply tremendous intuitive, simple to make use of, and appears to get higher each quarter. For instance, Robinhood is consistently including new options. Listed below are only a few of the new options Robinhood added in 2023:

I’ve used Robinhood for years and contemplated ditching it in the course of the GameStop frenzy. However, I attempted out a handful of different apps and simply discovered that none of them actually had the identical smooth really feel that Robinhood has. It was a bit like going from an iPhone to a different smartphone. There are positively different good smartphones in the marketplace. However, the iPhone simply feels good while you use it. The identical goes for Robinhood when evaluating it to different monetary apps.

I’d usually say that an organization that gives such a greater expertise than its rivals is a protected wager. However, Robinhood additionally has a singular danger that I imagine cancels out its superb UI.

Robinhood’s Distinctive Threat: Individuals Hate It

If Robinhood had by no means performed a task within the GameStop Quick Squeeze then I’d doubtless be singing its praises. However, it did. Now, there’s a hefty base of buyers that simply plain hate Robinhood. For those who’re unfamiliar with the GameStop saga then you definitely’ll have to go examine it to actually perceive why so many individuals hate this firm. However, simply know that there’s a really sturdy anti-Robinhood sentiment amongst retail buyers and I simply don’t see it going away anytime quickly – regardless of what number of PR stunts the corporate pulls.

This anti-Robinhood sentiment implies that there are a whole bunch and even 1000’s of buyers who will bad-mouth the app to their associates. Not solely will this group refuse to make use of Robinhood. However, they’ll encourage their family and friends to remain far-off. In the end, this implies fewer customers on Robinhood and fewer income for the corporate.

Sketchy Income Sources

Another excuse that folks are likely to hate Robinhood is due to the way it makes cash. Robinhood generates most of its income via a sketchy course of known as cost for order stream. Cost for order stream is when Robinhood receives compensation for routing retail purchase and promote orders to a selected market maker, who takes the opposite aspect of the order. This course of was pioneered by Bernie Madoff, which tells you all you should learn about cost for order stream.

To be clear, cost for order stream isn’t technically unlawful. It’s simply…type of sketchy. Robinhood pioneers itself as “democratizing finance for all!” Even the corporate identify implies that it steals from the wealthy to present to the poor.

However, it actually does the precise reverse.

Robinhood makes cash by promoting dealer orders from retailer merchants to Huge Cash market makers. It’s a bit like how Fb advertises that it needs you to “join with your mates” when all they actually care about is harvesting and promoting your knowledge.

Hood Inventory: Ultimate Ideas

In my view, there aren’t sufficient optimistic elements round Robinhood that make it a “purchase.” So, I’d should say that I’m quick on the corporate over the approaching months. On one hand, Robinhood has constructed a fantastic platform and may very well be poised to profit from lowering rates of interest within the coming months.

However, the corporate hasn’t been rising exceptionally quick over the previous few quarters. Plus, there may be nonetheless a really giant group of people that hate Robinhood and can refuse to make use of it. This may doubtless proceed to hinder Robinhood’s development prospects for months to return. 

There could also be a small little bit of upside to purchasing hood inventory. However, there are much more thrilling shares and firms to put money into proper now. I hope that you just’ve discovered this evaluation of Hood inventory to be precious! For those who’re involved in studying extra then please subscribe under to get alerted of recent articles from InvestmentU.

Disclaimer: This text is for basic informational and academic functions solely. It shouldn’t be construed as monetary recommendation because the creator, Ted Stavetski, isn’t a monetary advisor.