Hood Inventory: Time to Re-examine Robinhood?

Nevertheless, by this level, the GameStop brief squeeze was years in the past. I really even ranked Robinhood as one of many 2 greatest 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 revenue hasn’t actually been rising on a quarterly foundation. The year-over-year comparisons look good at first. However, it is a little deceptive as a result of 2022 wasn’t a very sturdy 12 months for Robinhood. It’s additionally value noting that Robinhood has not posted an annual revenue as a public firm (aside 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 actually 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 a very powerful takeaways. 

Robinhood’s Most Latest Earnings

Listed below are a very powerful takeaways from Robinhood’s final earnings report:

• Robinhood is targeted on profitable the lively 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 have been up 25% to 1.4 million and property beneath custody exceeded $100 billion, fueled by the energy of our 27% natural development in web deposits. 

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

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

That stated, to essentially 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: Superb UI

One factor that separates Robinhood from each different funding brokerage is its consumer 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 continually 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 throughout the GameStop frenzy. However, I attempted out a handful of different apps and simply discovered that none of them actually had the identical modern really feel that Robinhood has. It was a bit like going from an iPhone to a different smartphone. There are undoubtedly different good smartphones in the marketplace. However, the iPhone simply feels good if 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 secure wager. However, Robinhood additionally has a singular danger that I consider cancels out its wonderful UI.

Robinhood’s Distinctive Danger: Individuals Hate It

If Robinhood had by no means performed a job within the GameStop Quick Squeeze then I’d doubtless be singing its praises. However, it did. Now, there’s a hefty base of traders that simply plain hate Robinhood. If you happen to’re unfamiliar with the GameStop saga then you definitely’ll have to go examine it to essentially perceive why so many individuals hate this firm. However, simply know that there’s a really sturdy anti-Robinhood sentiment amongst retail traders 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 signifies that there are tons of and even hundreds of traders who will bad-mouth the app to their pals. Not solely will this group refuse to make use of Robinhood. However, they’ll encourage their family and friends to remain distant. In the end, this implies fewer customers on Robinhood and fewer income for the corporate.

Sketchy Income Sources

One more reason that individuals are inclined to hate Robinhood is due to the way it makes cash. Robinhood generates most of its income by means of a sketchy course of known as fee for order movement. Fee for order movement is when Robinhood receives compensation for routing retail purchase and promote orders to a selected market maker, who takes the opposite facet of the order. This course of was pioneered by Bernie Madoff, which tells you all you’ll want to learn about fee for order movement.

To be clear, fee for order movement 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 pals” when all they actually care about is harvesting and promoting your knowledge.

Hood Inventory: Ultimate Ideas

In my view, there are usually not sufficient optimistic components round Robinhood that make it a “purchase.” So, I’d should say that I’m brief on the corporate over the approaching months. On one hand, Robinhood has constructed an important platform and might 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’s nonetheless a really massive 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 come back. 

There could also be a small little bit of upside to purchasing hood inventory. However, there are much more thrilling shares and corporations to put money into proper now. I hope that you simply’ve discovered this evaluation of Hood inventory to be beneficial! If you happen to’re serious about 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 writer, Ted Stavetski, isn’t a monetary advisor.