Robinhood Surges to Record Revenue in Market Revival

Robinhood, the popular trading app, is gearing up to announce its strongest quarterly revenue in almost three years, signaling a notable rebound in equity markets and cryptocurrency trading.

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The surge in bets on global interest rate cuts earlier this year pushed U.S. stocks and bitcoin to unprecedented highs, enticing traders back into the market and boosting transaction-based revenue for the retail-focused brokerage.

Having been at the epicenter of the meme stock frenzy in 2021, Robinhood is now rebounding from a slowdown in retail trading activity that followed the trading surge during the pandemic.

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J.P. Morgan analysts observed, "We witnessed a substantial rebound in volumes this quarter across equities, options, and crypto, with total volumes up by nearly 20% in Q1 through February reported metrics."

This resurgence in retail trading activity propelled Robinhood's shares up by 58% in the first three months of the year, marking the most significant quarterly stock surge since its listing.

Insights:

According to data from research firm Apptopia, daily active users for Robinhood surged by 65% in March from a year earlier, while total new mobile app downloads soared by 94% during the same period.

Based in Menlo Park, California, Robinhood, known for popularizing commission-free trading, is expected to benefit from a rise in net interest revenue. The platform allows certain customers to borrow money to purchase securities.

Net interest revenue, the primary revenue driver for the company, is projected to increase by 24% to $258.24 billion in the first quarter.

Patrick Moley, an analyst at Piper Sandler, commented, "Online retail brokers witnessed robust growth in both trading volumes and margin loan balances and are poised to continue benefiting from higher-for-longer rates."

Robinhood's assets under custody (AUC) surpassed the $100 billion mark for the second consecutive month in February. The company reported a surprise profit in the final quarter of 2023 and aims for profitable growth in 2024.

Key Figures:

• Robinhood is set to report its strongest quarterly revenue since the second quarter of 2021.

• Analysts anticipate a 24% increase in revenue to $548.61 million, driven by growth in net interest revenue.

• Crypto trading revenue is expected to more than double from a year earlier to $80 million.

Market Outlook:

• The average recommendation from 17 brokerages covering Robinhood is "hold."

• The median price target for the company is $19, reflecting a 65% increase from three months ago.

• Robinhood trades at 64.01 times its forward earnings estimate, compared to the industry median of 10.97.

• While the stock reached a more than two-year high in late March, it has more than halved in value since its July 2021 market debut.

Also Read: 3 AI Stocks Set to Shine for the Rest of the Year 2024