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Robinhood Markets stock (NASDAQ: HOOD) declined by means of on the subject of 13% far and wide the overall week, after the company published a weaker than expected set of Q3 2021 results. Source of revenue declined by means of about 15% sequentially to about $365 million as the company’s crypto business – which shoppers were counting directly to be a long-term driving force of growth – spotted a big hit, with transaction-based source of revenue declining $51 million, down from $233 million in the second quarter. Even though Bitcoin prices in reality gained by the use of Q3, Robinhood’s crypto source of revenue has been further relying on Dogecoin, which spotted prices decline a little of of in contemporary months. Robinhood moreover spotted usual funded accounts on its platform drop to 22.4 million, down from 22.5 million at the end of the second quarter for the reason that so-called “meme stock” craze that drove engagement earlier this three hundred and sixty five days delicate. When compared, the company added about 10 million accounts over the principle a part of the three hundred and sixty five days.

So is Robinhood stock a purchase order order order after the new sell-off? Even though the stock now trades at about $35 in line with percentage, about 8% beneath its IPO price and spherical 50% from its all-time highs, we expect the stock has important risks. It is going to will have to be beautiful clear to shoppers that Robinhood’s growth is dependent upon investing fads that may not cling up. With inflation on the rise, it’s conceivable that the Fed would in all probability raise interest rates sooner, impacting the prices of stocks and other asset classes an very similar to cryptos that have been favorites of retail shoppers. If truth be told, Robinhood says that it expects fourth-quarter source of revenue “not more than $325 million,” that implies that it’s going to submit a sequential decline in product sales of a minimum of 11%. Festival could also be vulnerable to upward thrust, with critiques that fintech number one PayPal is taking a look to enter the stock purchasing and promoting space. Moreover, Robinhood moreover faces regulatory scrutiny into its source of revenue taste which comes to selling the order glide of its shoppers to market makers. This will likely possibly pose a threat to the company’s business. We neatly definitely worth the stock at about $32 in line with percentage, translating right kind right kind proper right into a discount of about 10% from the existing market price. See our analysis on Robinhood Valuation: Is HOOD Stock Expensive Or Somewhat priced? for additonal details on Robinhood Stock’s valuation and comparison with buddies.

[10/12/2021] What’s Going down With Robinhood Stock?

Robinhood Markets (NASDAQ:HOOD) could also be very best possible known as a zero-commission brokerage app that Millennials change into to, to cash in on the soaring Covid-19 stock market and to go back and forth the meme stock wave. Alternatively, Robinhood stock which used to be as soon as listed in late July hasn’t in truth delivered for purchasers since its tick list this Summer time. While Robinhood used to be as soon as listed at a value of about $38 in line with percentage, it nowadays trades relating to $42 in line with percentage, after in short rising to as much as $70 in line with percentage. So what’s maintaining Robinhood stock all over again? We think there are a couple of portions.

Retail shoppers, who powered Robinhood’s growth, normally are such a lot so much a lot much less thinking about stock purchasing and promoting, as they headed all over again to the administrative center and seek recreational outside, following the Covid-19 lockdowns.  For point of view, Robinhood’s app downloads, which can also be spotted as a rough estimate of recent account openings, declined 78% over Q3 2021, versus Q2, in line with wisdom from Apptopia. Other brokerages and crypto purchasing and promoting platforms have spotted the sort of lot smaller declines, when compared.

There moreover appears to be some regulatory issues for Robinhood. The company’s core equity and conceivable alternatives business goes by the use of some scrutiny from the SEC over its source of revenue taste which comes to selling the order glide of its shoppers to market makers. The company moreover in recent times warned that rising regulatory scrutiny of cryptocurrencies would in all probability pose a threat to its business. For point of view, worth for order glide accounted for kind of 38% of source of revenue in Q2 2021 while cryptocurrencies accounted for 41% of usual source of revenue.

Robinhood stock has a quite limited glide nowadays and may well be seeing some energy in anticipation of lockup expiries and plans of enormous shareholders to liquidate their shares. For example, in early August the company mentioned in an SEC filing that some supply shoppers who bought into the company by means of personal placement plan to advertise in relation to 97.9 million shares through the years.

We price Robinhood stock at about $39 in line with percentage, quite beneath the existing market price. See our analysis on Robinhood Valuation: Is HOOD Stock Expensive Or Somewhat priced? for additonal details on Robinhood Stock’s valuation and comparison with buddies.

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[9/21/2021] Robinhood Is Pushing Further Into Crypto Business. How Will This Have an effect on Its Stock?

Robinhood Markets (NASDAQ:HOOD), very best known as a zero-commission stock brokerage, has been increasingly more specializing in improving its cryptocurrency conceivable alternatives. Bloomberg critiques that Robinhood is making an attempt out new cryptocurrency wallet and turn possible choices for its app. While shoppers can already acquire and advertise crypto property an very similar to Ethereum and Bitcoin on the Robinhood platform, the wallet serve as would allow shoppers to store and get in a position all their virtual currencies in one place, and along with use them and not using a wish to change into them to bucks. This has been a some distance sought-after serve as and would in all probability allow the company to raised compete with the large crypto platforms an very similar to Coinbase. Separately, ultimate week, the company mentioned that it’ll allow shoppers to prepare bizarre investments in crypto property, essentially environment a certain quantity to be invested on a periodic basis, automatically.

Robinhood’s interest in crypto is understandable. Over Q2 2021, cryptocurrency accounted for over 51% of the company’s usual transaction revenues, eclipsing its core conceivable alternatives and equity purchasing and promoting corporations. If truth be told, over Q2 shoppers gave the impression to be signing up on Robinhood mainly for its crypto conceivable alternatives, with further new shoppers placing their first business in cryptocurrencies quite than equities. The increasing crypto exposure will have to moreover lend a hand de-risk Robinhood’s source of revenue streams to an extent, as its core equity and conceivable alternatives business faces mounting scrutiny from the SEC over its worth for order glide taste. The SEC doesn’t in truth keep an eye on the crypto market, on the other hand. That mentioned, the crypto market is cyclical and Robinhood’s revenues may well be a lot more susceptible in a downturn, given its point of interest on retail shoppers no longer like platforms an very similar to Coinbase who derive an increasing portion of product sales from institutions.

We price Robinhood stock at about $39 in line with percentage, kind of in line with the existing market price. See our analysis on Robinhood Valuation: Is HOOD Stock Expensive Or Somewhat priced? for additonal details on Robinhood Stock’s valuation and comparison with buddies.

[9/7/2021] What’s Going down With Robinhood Stock?

Even though Robinhood Markets (NASDAQ:HOOD) could also be very best possible known as a zero-commission stock brokerage that’s well-liked by millennials and first-time shoppers, the company in reality has an overly fast-growing cryptocurrency business. Over the newest quarter, cryptocurrency accounted for over 51% of the company’s usual transaction revenues, eclipsing its core conceivable alternatives and equity purchasing and promoting corporations.  If truth be told, in Q2 shoppers appear to be signing up on Robinhood mainly for its crypto conceivable alternatives, with further new shoppers placing their first business in cryptocurrencies quite than equities. Over 60% of Robinhood’s cumulative funded accounts traded in crypto far and wide Q2 2021. Crypto-related source of revenue streams surged from a mere $5 million in Q2 2020 to with regards to $233 million in Q2 2021. Even though this is behind the likes of Coinbase, which posted about $2 billion in Q2 product sales, Robinhood’s crypto growth remains to be noteworthy.

Robinhood supplies free trades for cryptocurrency, earning profits by means of selling the order glide of its shoppers to market makers, the sort of lot adore it does for conceivable alternatives and equity. Alternatively, no longer similar to the equity and conceivable alternatives worth for order glide corporations which has come beneath scrutiny, the regulatory risks are possibly lower for the crypto business, for the reason that SEC doesn’t in truth keep an eye on the crypto market. That being mentioned, we don’t assume that Robinhood can depend on its crypto business to power consistent growth. The cryptocurrency market could be very dangerous and could also be topic to multi-year cycles (maximum steadily two to 4 years) and engagement would in all probability briefly fall off in a go through market. Even though it is a threat that each one crypto brokers face, the affect on Robinhood may well be further pronounced as the company largely caters to first-time shoppers who would in all probability pull out as markets decline. When compared, rival Coinbase derived kind of two-third of its crypto purchasing and promoting volumes over its most recent quarter from institutional shoppers, who are such a lot so much a lot much less vulnerable to scale back.

We price Robinhood stock at about $39 in line with percentage, indicating a disadvantage of about 13% from the existing market price. See our analysis on Robinhood Valuation: Is HOOD Stock Expensive Or Somewhat priced? for additonal details on Robinhood Stock’s valuation and comparison with buddies.

[9/3/2021] What’s Going down With Robinhood Stock?

Robinhood stock (NASDAQ: HOOD) declined by means of on the subject of 5% far and wide the overall week (5 purchasing and promoting days), compared to the S&P 500 which used to be as soon as up by means of over 1% throughout the an an identical period. There are two key portions driving the new decline.

First of all, the Securities and Trade Value Chairman Gary Gensler has indicated in an interview with Barron’s that the corporate used to be as soon as bearing in mind banning the expenses for order glide (PFOF) taste which subsidizes the zero-commission brokerage taste that Robinhood uses. The manner is debatable, as it comes to selling the order glide of Robinhood’s retail shoppers to market makers and high-frequency purchasing and promoting companies. Even though PFOF has kind of change into an ordinary observe inside the brokerage business, a ban would disproportionately affect Robinhood, which derived about a part of its transaction revenues over Q1 from stocks and conceivable alternatives, compared to other avid avid avid avid gamers who are further excited by interest-related revenues and other services and products and merchandise.

Secondly, further festival moreover appears to be on the horizon, with expenses number one PayPal it kind of feels that updating its app to allow stock purchasing and promoting by means of shoppers. PayPal would in all probability pose a valid danger to Robinhood for a couple of reasons. PayPal has over 400 million accounts, most of which can also be attached with shoppers’ monetary status quo accounts, compared to merely over 22 million accounts for Robinhood, allowing it to concentrate on a large pool of consumers who most no doubt already have its app installed. Moreover, PayPay is most no doubt taking a look to use its stock purchasing and promoting possible choices as some way of driving engagement to its app, so that it could in reality advertise its expenses and other financial services and products and merchandise. This will likely possibly make it such a lot so much a lot much less reliant on purchasing and promoting revenues, giving it an edge over Robinhood.

We price Robinhood stock at about $39 in line with percentage, indicating a disadvantage of about 13% from the existing market price. See our analysis on Robinhood Valuation: Is HOOD Stock Expensive Or Somewhat priced? for additonal details on Robinhood Stock’s valuation and comparison with buddies.

[8/17/2021] Robinhood Stock Continues To Slide. Time To Get In?

Robinhood Markets (NASDAQ:HOOD), the zero-commission online brokerage usual among millennials, has spotted its stock price decline by means of about 16% far and wide the overall week (5 purchasing and promoting days) to about $47 in line with percentage. This compares to the S&P 500 which used to be as soon as up by means of kind of 1% over the an an identical period. Even though there wasn’t the sort of lot adverse knowledge with regards to the company in the past week, Robinhood has emerged as a “meme” stock of sorts, with its price movement dictated by means of interest from retail shoppers and other technical portions an very similar to its glide. The company allocated about 35% of its IPO shares to retail shoppers and along with had quite lax IPO lockup regulations, translating into the following glide and extra volatility.  Moreover, the stock spotted an important rally submit its tick list, rising by means of as much as 85% from its IPO price of about $38 at one degree earlier this month and this has most no doubt caused shoppers to influence some income.

So is the stock a purchase order order order at the moment levels? While Robinhood has fared neatly in recent times as it remains the go-to app for millennials taking a look to business stocks, we expect the stock is a little of of overrated purchasing and promoting at on the subject of 20x forward revenues. Even though the valuation is partly justified by means of the company’s solid growth, with product sales expected to kind of double this three hundred and sixty five days, there are risks as neatly. With inflation on the rise and the U.S. Federal Reserve taking a look at price hikes for 2023, a three hundred and sixty five days ahead of initial expectations, there’s an impressive likelihood that the stock markets would in all probability see limited positive components or most likely a correction, impacting brokerage corporations. Robinhood is further relying on purchasing and promoting revenues and may well be further adversely impacted by means of a pullback compared to festival, who rely further on interest revenues. The company’s business taste of manufacturing source of revenue by means of Value for Order Waft (PFOF) has moreover proved quite debatable. The SEC indicated that it used to be as soon as reviewing the PFOF taste and this is in a position to moreover create an overhang on the stock.

We price Robinhood stock at about $39 in line with percentage, indicating a disadvantage of about 17% from the existing market price. See our analysis on Robinhood Valuation: Is HOOD Stock Expensive Or Somewhat priced? for additonal details on HOOD stock’s valuation and comparison with buddies.

[8/4/2021] Robinhood stock: What are the risks?

Robinhood Markets (NASDAQ:HOOD), the zero-commission online brokerage, went public ultimate week. Even though the stock used to be as soon as off to a rocky get began, with prices in short dipping beneath the IPO price of about $38 in line with percentage, it now trades at about $47 in line with percentage, giving the company a market cap of kind of $40 billion. Robinhood has this type of lot going for it, as it remains the go-to app for millennials taking a look to business stocks, with growth surging all over the pandemic. For example,  funded accounts rose to over 22 million as of June 2021, up on the subject of 4x given that end of 2019. The company moreover has a fast-growing cryptocurrency business and with its huge and engaged shopper base, it’s conceivable that it’s going to endeavor into providing other financial services and products and merchandise as neatly. That being mentioned, we see a couple of key risks for the stock at this degree.

The S&P 500 is now up by means of over 90% from the lows of March 2020. With inflation on the rise and the U.S. Federal Reserve moreover taking a look at price hikes for 2023, a three hundred and sixty five days ahead of initial expectations, there’s an impressive likelihood that the stock markets would in all probability see limited positive components or most likely a correction, impacting brokerage corporations. While it is a threat that each one brokers face, the affect on Robinhood may well be further pronounced as the company largely caters to first-time shoppers who would in all probability scale back on purchasing and promoting as markets decline. Moreover, Robinhood appears to be further relying on transaction-related revenues (worth for order glide) versus its buddies. About 75% of the company’s revenues were relying on transactions ultimate three hundred and sixty five days. When compared, E-Industry, now were given by means of Morgan Stanley, derived kind of 65% of its revenues from interest income in 2019.

Robinhood’s bread-and-butter worth for order glide business – which comes to selling the order glide of its retail shoppers to market makers and high-frequency purchasing and promoting companies – could also be debatable, with critics arguing that it’s going to effectively give retail shoppers a worse price on their trades. In June, the SEC indicated that it used to be as soon as reviewing worth for order glide, causing some speculation that the observe, which is already illegal in international puts such for the reason that U.Ok., may well be banned inside the U.S. as neatly. While PFOF has kind of change into an ordinary observe for Robinhood’s festival an very similar to Charles Schwab and E-Industry, they are much so much a lot much less relying on it as a source of revenue motion, given their upper interest-related revenues and other services and products and merchandise.

Separately, there are some technical portions that may possibly affect the stock. The company mentioned that it’ll advertise about 35% of its IPO shares to retail shoppers. This is by contrast with other companies who have maximum steadily allocated neatly beneath 10% of the stock available to be had available on the market to other folks, environment aside a bulk of stock for institutional shoppers and high-net-worth other folks, who perpetually have a longer-term investment horizon. This will likely possibly make the stock further vulnerable to huge movements. For example, the stock rallied by means of 24% on Monday alone, for no glaring the reason why. It’s most no doubt we could see an identical swings on the problem as neatly. Robinhood moreover has looser submit IPO lockup regulations. Insiders were allowed to advertise 15% of their holdings from the time the company went public, with each different 15% it kind of feels that being freed up inside of 3 months. This will likely possibly translate into the following supply of stock, placing energy on the stock price inside the relating to period of time.

See our analysis on Robinhood Valuation: Is HOOD Stock Expensive Or Somewhat priced? for additonal details on HOOD stock’s valuation and comparison with buddies.

[7/22/2021] How Does Robinhood Markets Make Money?

Robinhood Markets, the zero-commission online brokerage well-liked by millennials, is expected to transport public next week purchasing and promoting beneath the ticker HOOD on the Nasdaq. The company can also be providing shares at between $38 to $42 apiece, just about needless to say translating right kind right kind proper right into a valuation of as much as $35 billion. In our dashboard Robinhood Revenues: How Does HOOD Make Money? we provide an outline of Robinhood’s business taste and its key source of revenue streams. Parts of the analysis are summarized beneath.

Robinhood’s Business Taste

Robinhood is a internet founded brokerage that gives commission-free trades of stocks,  exchange-traded worth vary, and cryptocurrency. Even though Robinhood doesn’t directly worth its shoppers for trades, it mainly makes money from market makers and frequency purchasing and promoting companies who pay for the order glide from its retail shoppers. Expenses for order glide, or PFOF, accounted for kind of 75% of the company’s source of revenue ultimate three hundred and sixty five days. Additionally, Robinhood moreover earns source of revenue from interest on securities and margins loans. The company moreover supplies other services and products and merchandise together with the Robinhood Gold best elegance subscription supplier, which supplies shoppers get entry to to possible choices together with professional research and margin purchasing and promoting.

How Have Revenues Trended?

Robinhood has spotted its transaction-based revenues building up 320% from spherical $170 million in 2019 to about $720 million in 2020. In Q1 2021, transaction revenues grew further by means of about 340% year-over-year to $420 million. The source of revenue surge comes as further retail shoppers were attracted to the stock markets given the large bull run all over the Covid-19 pandemic and extra in recent times, the meme stock purchasing and promoting frenzy. For point of view, the selection of funded accounts on Robinhood grew from spherical 5.1 million at the end of 2019 to about 12.5 million in 2020 and stood at an estimated 22.5 million as of the very best of June 2021.  The retail purchasing and promoting frenzy has moreover meant that Robinhood is able to upper monetize its shoppers.  The frequently source of revenue in line with shopper rose from $65.70 in 2019 to $108.90 in 2020 and to about $137 in Q1 2021, on an annualized basis.

Even though conceivable alternatives keep crucial driving force of Robinhood’s transaction source of revenue (47% of product sales), the cryptocurrency business is the fastest-growing. In Q1 2021, crypto-related source of revenue soared by means of spherical 20x year-over-year to with regards to $88 million. Except the core transactions business, Robinhood’s other segments have moreover been expanding, with internet interest source of revenue and other source of revenue together rising by means of on the subject of 3x in Q1 compared to ultimate three hundred and sixty five days.  That mentioned, Robinhood is in reality getting further relying on its transaction revenues, which accounted for just about 81% of product sales over Q1, versus about 75% ultimate three hundred and sixty five days.

 

What Are The Risks? 

While Robinhood’s contemporary product sales growth has been tricky, there are near-term risks. The stock markets may well be peaking, with the S&P 500 now up about 90% from the lows of March 2020. Moreover, inflation is on the rise, and the U.S. Federal Reserve could also be taking a look at price hikes for 2023, a three hundred and sixty five days ahead of initial expectations. A sharp market correction or even sideways movement would in all probability prohibit interest in Robinhood’s platform, which largely caters to first-time shoppers. Separately, Robinhood’s bread-and-butter worth for order glide business taste could also be debatable, with critics arguing that it’s going to effectively give retail shoppers a worse price on their trades. Final month, the SEC indicated that it used to be as soon as reviewing worth for order glide, causing some speculation that the observe, which is already illegal in international puts such for the reason that U.Ok., may well be banned inside the U.S. as neatly. While PFOF has kind of change into an ordinary observe for Robinhood’s festival an very similar to Charles Schwab and E-Industry, they are much so much a lot much less relying on it as a source of revenue motion, given their upper interest-related revenues and other services and products and merchandise.

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The views and critiques expressed herein are the views and critiques of the writer and do not necessarily reflect those of Nasdaq, Inc.


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