I’ve a love-hate relationship with Robinhood (Nasdaq: HOOD). The inventory buying and selling app pretends to function below the pretense of “democratizing finance for everybody.” However, Robinhood revealed its true colours throughout the “GameStop Brief Squeeze” when the corporate halted buying and selling on GameStop shares with a purpose to defend its cronies on Wall Avenue. Yikes.

 

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 commonest first step is to look at its most up-to-date earnings experiences. 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, this can be a little deceptive as a result of 2022 wasn’t a very robust yr for Robinhood. It’s additionally price noting that Robinhood has not posted an annual revenue as a public firm (aside from eeking out a $7m achieve 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). To this point, nothing is tremendous spectacular about Hood inventory.

 

With that mentioned, I took a take a look at Robinhood’s most up-to-date earnings experiences and located crucial takeaways. 

Robinhood’s Most Current Earnings

 

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

 

Robinhood is targeted on successful the lively dealer market, growing 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 below custody exceeded $100 billion, fueled by the power of our 27% natural progress in internet deposits. 

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

 

There’s additionally the truth that we’re at present on the finish of a interval of rising curiosity. Wanting ahead, buyers anticipate the Federal Reserve to even begin decreasing charges as early as this yr. 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 mentioned, to essentially perceive Hood inventory, we have to study its distinctive worth proposition and distinctive danger. This can 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 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, straightforward to make use of, and appears to get higher each quarter. For instance, Robinhood is continually including new options. Listed here are just some 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 smooth really feel that Robinhood has. It was a bit like going from an iPhone to a different smartphone. There are undoubtedly different good smartphones available on the market. However, the iPhone simply feels good once 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 guess. However, Robinhood additionally has a novel danger that I consider cancels out its superb UI.

Robinhood’s Distinctive Danger: Individuals Hate It

If Robinhood had by no means performed a job within the GameStop Brief 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. In the event you’re unfamiliar with the GameStop saga then you definitely’ll must go examine it to essentially perceive why so many individuals hate this firm. However, simply know that there’s a really robust anti-Robinhood sentiment amongst retail buyers and I simply don’t see it going away anytime quickly – irrespective of what number of PR stunts the corporate pulls.

 

This anti-Robinhood sentiment implies that there are a whole lot and even hundreds of buyers who will bad-mouth the app to their buddies. Not solely will this group refuse to make use of Robinhood. However, they’ll encourage their family and friends to remain distant. Finally, this implies fewer customers on Robinhood and fewer income for the corporate.

Sketchy Income Sources

One more reason that folks are likely to hate Robinhood is due to the way it makes cash. Robinhood generates most of its income by way of a sketchy course of referred to as cost for order circulate. Fee for order circulate 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 might want to learn about cost for order circulate.

 

To be clear, cost for order circulate will not be technically unlawful. It’s simply…form 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 desires you to “join with your folks” when all they actually care about is harvesting and promoting your knowledge.

Hood Inventory: Closing Ideas

For my part, 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 may very well be poised to profit from reducing 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 giant group of people that hate Robinhood and can refuse to make use of it. This can doubtless proceed to hinder Robinhood’s progress 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 corporations to spend money on proper now. I hope that you just’ve discovered this evaluation of Hood inventory to be priceless! In the event you’re desirous about studying extra then please subscribe beneath to get alerted of recent articles from InvestmentU.

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