Robinhood Markets Inc
NASDAQ:HOOD
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Intrinsic Value
The intrinsic value of one HOOD stock under the Base Case scenario is 14.4463 USD. Compared to the current market price of 35.7499 USD, Robinhood Markets Inc is Overvalued by 60%.
The Intrinsic Value is calculated as the average of DCF and Relative values:
Valuation Backtest
Robinhood Markets Inc
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Fundamental Analysis
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Robinhood Markets Inc. emerged onto the financial landscape with a mission to democratize investing, capturing the attention of both novice and seasoned investors alike. Founded in 2013 by Vladimir Tenev and Baiju Bhatt, Robinhood disrupted the traditional brokerage model by offering commission-free trading and a user-friendly mobile platform. This innovative approach not only attracted millions of users looking for a simple, low-cost way to engage in stock trading but also ignited discussions about the future of investing in a digital age. With services that include cryptocurrencies, options, and exchange-traded funds (ETFs), Robinhood has established itself as a go-to platform for the tech...
Robinhood Markets Inc. emerged onto the financial landscape with a mission to democratize investing, capturing the attention of both novice and seasoned investors alike. Founded in 2013 by Vladimir Tenev and Baiju Bhatt, Robinhood disrupted the traditional brokerage model by offering commission-free trading and a user-friendly mobile platform. This innovative approach not only attracted millions of users looking for a simple, low-cost way to engage in stock trading but also ignited discussions about the future of investing in a digital age. With services that include cryptocurrencies, options, and exchange-traded funds (ETFs), Robinhood has established itself as a go-to platform for the tech-savvy, younger generation eager to take control of their financial futures.
As the company grew, so did its challenges. Rapid expansion led to scrutiny, particularly during the 2020 GameStop trading frenzy, raising questions about regulatory compliance and the practices of payment for order flow. Still, Robinhood continues to evolve, enhancing its platform with educational resources and diversification of investment options aimed at empowering users to make informed decisions. For investors considering Robinhood, understanding its unique position in the market as a pioneer of commission-free trading, coupled with its ongoing efforts to innovate and maintain regulatory compliance, can provide important insights into its potential for growth and profitability in the future. With the backdrop of a shifting financial landscape and changing consumer behaviors, Robinhood represents both opportunities and risks in a market increasingly characterized by rapid technological advancements.
Robinhood Markets Inc. operates primarily in the financial technology sector, focusing on democratizing access to financial markets. Here are the core business segments of Robinhood:
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Retail Brokerage:
- This is the primary segment of Robinhood's business. It allows individual investors to trade stocks, ETFs, and options without paying commission fees. The user-friendly mobile app and web platform have attracted a large number of retail investors, particularly younger demographics.
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Cash Management:
- Robinhood provides users with a cash management feature that allows them to earn interest on uninvested cash. This service includes features like a debit card and the ability to use direct deposit, enhancing the overall user experience for managing funds.
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Cryptocurrency Trading:
- Robinhood offers a cryptocurrency trading platform where users can buy, sell, and hold various cryptocurrencies without commissions. This segment has been crucial in attracting a new customer base interested in digital assets.
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Robinhood Gold:
- This is a premium subscription service that offers features such as margin trading, access to research reports, and increased buying power. It caters to more sophisticated investors who seek advanced trading tools and analysis.
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Stock Lending:
- Robinhood earns revenue by lending out shares owned by users to other financial institutions short-selling those stocks. This segment contributes to the company's revenue model without impacting the user's ability to sell their shares.
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Payment for Order Flow (PFOF):
- A significant portion of Robinhood's revenue comes from payment for order flow, where market makers pay the company for the right to execute trades initiated by Robinhood users. While this model has come under scrutiny, it remains a critical part of Robinhood's business strategy.
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Financial Products and Services:
- Robinhood is expanding its portfolio to include more financial services, such as retirement accounts, options trading, and educational resources to empower users to make informed investment decisions.
By focusing on these core segments, Robinhood aims to create a comprehensive platform that encourages investment and financial literacy among users, particularly those who are new to the market.
Robinhood Markets Inc. has developed several unique competitive advantages that set it apart from its rivals in the fintech and brokerage industry. Here are some key advantages:
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Commission-Free Trading: Robinhood pioneered the commission-free trading model, eliminating fees for stock, ETF, and options trades. This was a significant shift in the brokerage industry, attracting a younger, cost-conscious demographic while forcing rivals to follow suit.
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User-Friendly Interface: The app's design is focused on simplicity and ease of use, making trading accessible to novice investors. This user-friendly experience contrasts with more complex platforms offered by traditional brokers.
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Mobile-First Experience: Robinhood's mobile-first approach aligns well with the preferences of newer generations, who tend to manage their finances through smartphones rather than desktop applications. This accessibility enhances user engagement.
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Fractional Shares: Robinhood allows users to buy fractional shares, enabling investors to purchase portions of costly stocks. This feature democratizes investing, allowing those with less capital to build diversified portfolios.
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Instant Deposits and Access to Funds: The platform provides instant access to funds for trades, allowing users to invest immediately without waiting for bank transfers. This can enhance user engagement and satisfaction.
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Cryptocurrency Trading: Robinhood was one of the first major brokers to offer commission-free cryptocurrency trading. This positions the platform favorably in a growing market segment for digital assets.
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Brand Loyalty and Community Engagement: Robinhood has cultivated a strong community of users and advocates through educational resources, social media presence, and gamified trading experiences. This brand loyalty can lead to higher retention rates.
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Data-Driven Insights: Robinhood leverages user data and behavior to enhance its offerings, potentially creating more personalized investment experiences and educational resources that resonate with users.
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Expansion Into Banking Services: Through products like Robinhood Cash Management, the company can offer integrated financial services, appealing to users looking for a more comprehensive financial platform.
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Unique Revenue Model: Robinhood’s reliance on payment for order flow (PFOF) allows it to generate revenue without traditional commissions. This model can increase profitability while maintaining user-friendly pricing.
These competitive advantages contribute to Robinhood's market position and appeal, especially among younger and tech-savvy investors. However, ongoing scrutiny from regulators, changes in market dynamics, and increased competition mean that it must continually adapt to maintain its edge.
Robinhood Markets Inc. faces several risks and challenges in the near future:
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Regulatory Scrutiny: The trading platform has faced significant scrutiny from regulators, particularly concerning its business model and practices. Ongoing and potential future regulations may impact its ability to operate effectively and could lead to fines or changes in operational practices.
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Competition: The investment and trading space is increasingly competitive, with traditional brokerages and new fintech companies offering similar services. This saturation could pressure Robinhood’s user growth and retention.
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Market Volatility: Fluctuations in the market can lead to reduced trading volumes. A downturn can significantly affect revenue, as Robinhood earns a substantial portion of its income from trading commissions.
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User Engagement and Retention: After the initial surge of users during the pandemic and the meme stock phenomenon, maintaining user engagement remains a challenge. Users may become less active if they do not see substantial opportunities.
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Public Perception and Reputation: Robinhood's reputation has been affected by various incidents, including the Gamestop trading debacle and outages during high volatility. Negative public perception can deter new users and impact existing ones.
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Technological Risks: Dependence on technology means that any disruptions—cybersecurity breaches, outages, or software bugs—can harm user trust and operational capability.
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Business Model Sustainability: The reliance on payment for order flow is a contentious issue and may come under regulatory pressure, affecting revenue generation.
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Economic Conditions: Macroeconomic factors such as inflation, interest rates, and economic downturns can impact consumer behavior and savings rates, potentially leading to reduced trading activity.
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International Expansion Challenges: Efforts to expand into international markets may face regulatory hurdles, competitive pressures, and challenges associated with different consumer behaviors and preferences.
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Legal Challenges: Ongoing lawsuits and potential legal challenges surrounding its business practices, particularly regarding user education and risk disclosures, pose additional risks.
In summary, while Robinhood enjoys a strong brand presence and a large user base, addressing these risks and adapting to the evolving financial landscape will be crucial for its long-term success and sustainability.
Revenue & Expenses Breakdown
Robinhood Markets Inc
Balance Sheet Decomposition
Robinhood Markets Inc
Current Assets | 42.6B |
Cash & Short-Term Investments | 10.7B |
Receivables | 5.7B |
Other Current Assets | 26.2B |
Non-Current Assets | 640m |
PP&E | 196m |
Intangibles | 218m |
Other Non-Current Assets | 226m |
Current Liabilities | 36B |
Accounts Payable | 6.7B |
Accrued Liabilities | 22m |
Short-Term Debt | 7.3B |
Other Current Liabilities | 21.9B |
Non-Current Liabilities | 79m |
Other Non-Current Liabilities | 79m |
Earnings Waterfall
Robinhood Markets Inc
Revenue
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2.4B
USD
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Cost of Revenue
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-146m
USD
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Gross Profit
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2.3B
USD
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Operating Expenses
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-1.7B
USD
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Operating Income
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524m
USD
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Other Expenses
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1m
USD
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Net Income
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525m
USD
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Free Cash Flow Analysis
Robinhood Markets Inc
USD | |
Free Cash Flow | USD |
In Q3, Robinhood reported a robust 36% revenue growth, reaching $637 million, with adjusted EBITDA nearly doubling to $268 million. Assets under custody soared 76%, totaling $152 billion, alongside net deposits exceeding $10 billion for the third consecutive quarter. The new Robinhood Gold Card, attracting strong customer interest with a waitlist of nearly 2 million, showed promising early metrics, reflecting a retention rate of 95% among users. As the firm targets more active traders and plans to introduce innovative products like index options and futures, they anticipate a continued focus on profitable growth into 2024, aiming for adjusted OpEx in the $1.85 to $1.95 billion range.
What is Earnings Call?
HOOD Profitability Score
Profitability Due Diligence
Robinhood Markets Inc's profitability score is 36/100. The higher the profitability score, the more profitable the company is.
Score
Robinhood Markets Inc's profitability score is 36/100. The higher the profitability score, the more profitable the company is.
HOOD Solvency Score
Solvency Due Diligence
Robinhood Markets Inc's solvency score is 56/100. The higher the solvency score, the more solvent the company is.
Score
Robinhood Markets Inc's solvency score is 56/100. The higher the solvency score, the more solvent the company is.
Wall St
Price Targets
HOOD Price Targets Summary
Robinhood Markets Inc
According to Wall Street analysts, the average 1-year price target for HOOD is 30.96 USD with a low forecast of 20.2 USD and a high forecast of 53.55 USD.
Dividends
Current shareholder yield for HOOD is .
Shareholder yield represents the total return a company provides to its shareholders, calculated as the sum of dividend yield, buyback yield, and debt paydown yield. What is shareholder yield?
Ownership
HOOD Insider Trading
Buy and sell transactions by insiders
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Profile
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Description
Robinhood Markets, Inc is a financial services platform that pioneered commission-free stock trading with no account minimums and fractional share trading. The company is headquartered in Menlo Park, California and currently employs 3,800 full-time employees. The company went IPO on 2021-07-29. The firm is principally focused on developing application for cash management such as stocks, exchange-traded funds, options, and cryptocurrency. The firm's platform offers trading in United States (U.S) listed stocks and exchange traded funds (ETFs), as well as related options and American depositary receipts (ADRs); cryptocurrency trading through its subsidiary, Robinhood Crypto, LLC (RHC); fractional trading, which enables its customers to build a diversified portfolio and access stocks; recurring investments; cash management, which includes Robinhood-branded debit cards; Robinhood Gold, a monthly paid subscription service that provides customers with features, such as instant access to deposits and professional research. The company also offers learning and education solutions, which include Robinhood Snacks, Robinhood Learn, Newsfeeds, Robinhood lists and alerts and First trade recommendations.
Contact
IPO
Employees
Officers
The intrinsic value of one HOOD stock under the Base Case scenario is 14.4463 USD.
Compared to the current market price of 35.7499 USD, Robinhood Markets Inc is Overvalued by 60%.