Robinhood (NASDAQ: HOOD) is maybe greatest identified for its function within the meme inventory frenzy just a few years in the past. After dealing with important scrutiny from traders and regulators, the corporate has reworked its platform, delivering spectacular development within the course of.
Over the previous yr, Robinhood’s inventory has surged 381% as administration incorporates quite a lot of initiatives to draw more money to its buying and selling platform. As buying and selling exercise soared alongside rising belongings, the corporate capped off final yr with record-breaking earnings.
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With the inventory climbing sharply, is it time to put money into Robinhood, or is it too late? This is every little thing it is advisable to know to resolve if Robinhood inventory is correct in your portfolio.
Robinhood had a report yr for earnings in 2024
Robinhood has navigated a number of challenges in recent times, from its function within the meme-stock phenomenon to its payment-for-order-flow business model. Whereas the corporate has attracted scrutiny from each traders and regulators, the previous yr marked a major transformation for the corporate because it advanced from a gamified buying and selling app to a full monetary providers supplier.
One concern I had concerning Robinhood final yr was its seemingly plateaued growth in buyer belongings. Nonetheless, it has completed a wonderful job in attracting clients, with its annual proportion yield (APY) of as excessive as 5% final yr.
Robinhood’s Gold subscription service, which expenses clients a $5 month-to-month charge, is a technique it rewards its members with increased rates of interest. Final yr, the corporate completed the yr with 2.64 million Gold subscribers, marking a powerful 86% development yr over yr and a 21% improve from the previous quarter.
Picture supply: Getty Photos.
This subscription offers it with a gentle income stream. Nonetheless, a much bigger profit is that these customers are considerably extra engaged on Robinhood’s platform. For instance, Gold subscribers maintain six instances extra belongings underneath custody (AUC) in comparison with common customers and are 4 instances extra prone to make the most of Robinhood’s retirement account providers.
Robinhood has launched retirement accounts tailor-made for unbiased staff, together with conventional and Roth IRAs. To build up extra belongings, the corporate affords matching contributions of 1% for all clients and as much as 3% for these with Robinhood Gold.
Robinhood’s initiatives are paying off large time. The corporate completed the yr with an AUC of $193 billion, a major improve from $103 billion a yr earlier. Within the fourth quarter alone, internet deposits soared by a report $16.1 billion.
As well as, Robinhood benefited from excessive buying and selling quantity throughout equities, choices, and cryptocurrencies. Cryptocurrency buying and selling surged by an astounding 455% yearly, pushed by optimism following Donald Trump’s election victory and the potential for more crypto-friendly policies.
This translated right into a report yr for the corporate, which raked in $2.95 billion in internet income, or a 58% development from one yr in the past. The corporate additionally managed bills and posted a $1.4 billion revenue, its first full-year usually accepted accounting rules (GAAP) revenue as a publicly traded firm.
HOOD Revenue (Quarterly) information by YCharts
What’s subsequent for Robinhood
Robinhood plans to proceed revamping its platform with Robinhood Legend, its desktop providing designed to cater to lively merchants. This platform offers added instruments and goals to draw and retain extra lively merchants. The corporate can also be increasing its monetary devices to incorporate index choices (which have sure tax advantages) and futures, giving it additional avenues for future development.
Additionally it is seeking to provide its clients occasion contracts (also referred to as prediction markets), the place they will guess on outcomes from the Presidential election to sporting occasions. The corporate rolled out contracts associated to the Tremendous Bowl, however just for someday earlier than the U.S. Commodity Futures Buying and selling Fee (CFTC) requested them to take it down.
Through the firm’s recentearnings name Robinhood CEO Vlad Tenev mentioned, “I feel prediction markets are the longer term. I feel they’re the longer term not simply as an lively buying and selling asset, but in addition information and data. And Robinhood’s going to be proper there main the best way.”
In a press launch, the corporate mentioned it “will proceed to collaborate with the CFTC as we work to roll out a extra complete occasion contracts platform later this yr.”
Is it a purchase?
Robinhood had a wonderful yr final yr and is rising its belongings underneath custody at a really good tempo. The corporate has turned a GAAP revenue in 4 consecutive quarters in a row, and its technique seems to be paying off.
Traders contemplating a place in Robinhood should weigh the valuation and its future development prospects. Robinhood seems costly at 38 instances this yr’s projected earnings, particularly for conservative traders searching for regular returns.
Nonetheless, in case you can abdomen the volatility, Robinhood has gotten again on monitor, and I am optimistic about its future development trajectory. The fintech has completed job getting extra from its clients and continues upgrading to draw extra merchants and traders to its platform. Due to this fact, I feel it is a strong purchase for growth-focused investors at present.
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Courtney Carlsen has positions in Robinhood Markets. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
