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Robinhood: From Discount Broker to Fintech Powerhouse

Key Takeaways

  • Robinhood is diversifying its business beyond equity trading.
  • By leveraging tokenization, HOOD is positioning itself as the "always-on" financial app.
  • HOOD has a consistent track record of growth and outperformance.

Robinhood: A Fintech Leader

Zacks Rank #3 (Hold) stock Robinhood Markets, Inc ((HOOD - Free Report) ) first garnered attention for becoming the first stockbroker to offer commission-free equity trading. This simple, yet unheard of idea transformed Robinhood from an obscure start-up into one of the most popular stock brokers worldwide. While clients pay zero commissions on equity trades, Robinhood makes money through payment for order flow (PFOF). PFOF is compensation that HOOD receives for routing customer orders through a particular market maker. Additionally, Robinhood generates revenue through margin lending, stock lending, and investing customer cash deposits.

Although HOOD shares got off to a rough start after its 2021 IPO (falling from ~$35 to $6), they have recovered amid massive top-and-bottom-line growth and currently trade above $100.

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Robinhood: A Fintech Innovator

While many legacy broker management teams get bogged down by being risk-averse, cumbersome regulations, and politics, Robinhood has become the foremost innovator in the fintech space with its innovative CEO, Vlad Tenev, at the helm. Below are three ways Robinhood is diversifying and growing its business:  

1.      Entry into Crypto & Options Markets: Robinhood is rapidly expanding beyond equity trading and into an all-in-one financial platform. HOOD entered the options and crypto businesses recently, and so far, each has taken off. Robinhood also recently launched prediction markets.

2.      The Tokenization Frontrunner: Today, investors want to trade stocks at anytime. Through creating derivative “tokens” that mimic real-world assets, Robinhood users will soon be able to trade more than 200 popular assets 24/7 – providing a significant edge over its competitors.

3.      Robinhood Gold: A premium subscription service that allows customers to enjoy benefits like higher interest on uninvested cash. Gold subscribers recently reached an all-time high of 3.9 million, providing a stable, recurring revenue stream.

Why You Should Buy Robinhood Stock

HOOD is Experiencing Explosive Growth

Robinhood has proven itself as a consistent, high-growth stock company. Zacks Consensus Estimates anticipate continued double-digit revenue and EPS growth through 2026.

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Robinhood Consistently Crushes Wall Street Expectations

Despite Robinhood’s success, Wall Street analysts continue to undervalue the company. Over the past four quarters, HOOD has beaten Zacks Consensus Estimates by a 25.75% margin on average.

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HOOD Technicals Lineup

The 200-day moving average has been a favorable area for investors to scoop up HOOD shares over the past few years. Shares are approaching the 200-day moving average again, offering investors another high-reward-to-risk opportunity.

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Bottom Line

Robinhood has evolved from a disruptive startup to a multifaceted financial titan. By continuously breaking down barriers, HOOD has created a loyal customer base that legacy brokers struggle to replicate.


 


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