The fact that group dynamics, social influences and collective emotions can influence the behavior of the masses is not an uncommon phenomenon on the stock markets. Starting with the tulip mania in the 17th century, mass hysteria arrived in 2021 with the "meme stocks". Back then, financial analyst and YouTuber Keith Gill triggered a rally among gambler stocks with his posts about GameStop, which even shook Wall Street. A few days ago, Gill resurfaced and a simple post was enough to prove the "power of the community" once again. Stocks such as AMC and GameStop literally exploded. The question of how sustainable the revival of meme stocks is is irrelevant for the Robinhood trading platform. Either way, the neobroker benefits from the increased activity.
Robinhood was already at the center of the meme frenzy in 2021. More trades mean more transactions and even though the company does not charge direct trading fees, it earns money through payment for order flow. In addition, not only did the customer base expand considerably, but the platform's reach also increased. With the IPO in mid-2021 at the latest, the brand became world-famous and an important player in the online brokerage market.
After the end of the earlier meme rally, however, the company's turnover came under pressure for the first time. The interim low point was reached with revenue of USD 299 million in the first quarter of 2022. The curve then curved upwards again. One year later, it was already USD 441 million and the start-up achieved new record figures at the start of 2024. Net sales rose by 40% to USD 618 million from January to March, while profit was put at USD 157 million or 18 cents per share. By comparison, the company reported a loss of USD 511 million in the same quarter of the previous year. The current result was also three times higher than analysts had expected on average.
The main reason for the strong opening quarter was the high demand for cryptocurrencies. Among other things, the approval of the first spot Bitcoin ETFs in the US in January boosted sentiment. Turnover in this asset class more than tripled to USD 126 million in the reporting period. However, trading in equities and options also performed well thanks to hopes of a soft landing for the US economy. In this area, the Californians achieved 59% higher transaction-based revenues. Meanwhile, the number of monthly active users almost reached a two-year high.
According to CFO Jason Warnick, the momentum continued in the second quarter despite some uncertainty about the timing of the first interest rate cut. Subscriber growth for Robinhood Gold, the company's paid service, also continues to be tremendous. "The 260,000 Gold subscribers we added in Q1 was the fastest in the past three years.," enthuses Vlad Tenev, CEO and co-founder of Robinhood. At the end of March, Robinhood even announced a credit card exclusively for Gold subscribers, which will offer several benefits such as 3% cashback. According to the company, over 1 million people have already signed up to the Gold Card waiting list.
Robinhood's share price initially rose dynamically following the positive news, then reversed course before heading upwards again shortly afterwards. This high volatility could be related to the ongoing SEC investigation into the company's crypto business, which threatens to cloud the future prospects of this source of income. However, the valuation generally does not seem to leave much room for upward movement either. After a share price increase of more than 40% this year, the consensus rating is "hold" with an average price target of USD 19.50. This corresponds to a downside potential of around 6%.
By contrast, a high positive return is possible with the new soft-callable barrier reverse convertibles on Robinhood. With a maximum term of 18 months - the first soft call observation date takes place after six months - the BRC on a CHF basis offers a guaranteed coupon of an attractive 15% p.a. With the USD version, a maximum interest rate of 19% p.a. is even possible. Unlike a direct investment, which only yields a profit if the share price rises, the Robinhood share may even fall with the two BRCs. It is important that the underlying does not touch the barrier. In both cases, this is set at a low 49% of the initial level.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.