Robinhood Making It Easier For All To Invest

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Palo Alto-based Robinhood (Nasdaq: HOOD) has been trying to make it easier for the average investor to invest in all financial markets – stocks, funds, and even cryptocurrency. The company went public earlier this year and recently reported its third-quarter results.

Robinhood’s Offerings

Robinhood was founded in 2013 by co-founders Baiju Prafulkumar Bhatt and Vlad Tenev. The founders believed that everyone should be able to participate in the financial system irrespective of their wealth, income, or background. While the financial system is expected to be set up like that, there are enough systemic barriers to investing, such as expensive commissions, minimum balance requirements, and complicated paperwork that deter people from investing freely.

To address these issues, Robinhood pioneered a commission-free stock trading capability with no account minimums. It leveraged technology to create a solution that managed appropriate regulatory approvals while providing a clearing platform. Its platform is entirely cloud-based and built on proprietary, API-driven services to meet the needs of a fast-growing, mobile-first, modern financial institution. It allows for a vertically integrated, end-to-end approach to product development, which helps it to better scale.

Its platform currently offers the ability to trade in U.S. listed stocks, ETFs, and ADRs, cryptocurrency trading, fractional trading, recurring investments, cash Management through Robinhood-branded debit cards, and Robinhood Gold, its monthly paid subscription service that provides customers with premium features, such as enhanced instant access to deposits, professional research, Nasdaq Level II market data, and access to margin investing.

To ensure it is able to cater to the continued evolution of the financial markets, Robinhood has been enhancing its product offerings. Last quarter, it opened the waitlist for crypto wallets, one of its most heavily requested products that has already seen more than 1 million customers sign up. Crypto wallets makes the cryptocurrency market more accessible to the average investor by providing them with an intuitive user experience and low-cost, competitive pricing. It also recently launched crypto recurring investments, so that customers can automatically buy crypto, commission-free, on a schedule of their choice.

It has also been working on building educational content for its users. It recently launched Robinhood Snacks, a digestible financial news content offering that is available directly within the Robinhood app. The Snacks newsletter has over 23.3 million unique readers in the US and its podcast has been downloaded 10.8 million times in the quarter. It expanded the Snacks offering to Snapchat, making it one of the first financially-oriented educational channels available on Snapchat’s Discover tab.

Recently, Robinhood announced the launch of its Recommendations engine, helping customers provide new customers looking to place their first trade with a collection of a diversified portfolio to choose from. It also launched 24/7 live phone support in its app, providing customers with phone support for any time and on any topic.

Robinhood’s Financials

Robinhood earns revenues through subscription fees, interest income on cash in its users’ accounts, and in the form of rebates by directing its order flow to broker-dealers. Its revenue in 2020 grew 245% to $959 million from $278 million in 2019. Net income grew to $7 million compared to a net loss of $107 million in 2019.

For the recently reported third quarter, Robinhood’s revenues grew 35% to $365 million. Net loss was $2.06 per share compared with $0.05 per share a year ago.

Transactions-based revenues grew 32% to $267 million, with Options up 29% to $164 million, Cryptocurrencies up 860% to $51 million, and Equities down 27% to $50 million.

Among key metrics, Monthly Active Users (MAU) increased 76% to 18.9 million, compared with 10.7 million a year ago. Assets Under Custody (AUC) grew 115% to $95 billion and Average Revenues Per User (ARPU) decreased 36% to $65.

Robinhood went public in July this year. Prior to going public, it raised $5.6 billion in 26 rounds of funding. The most recent round of funding was held in February of this year for $3.4 billion in a round led by Ribbit Capital, with participation from investors including ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures, and NEA. In July, it raised $2.1 billion by listing at $38 a stock at a valuation of $32 billion. It is currently trading at $35.73 with a market capitalization of $30.72 billion.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.

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