Bunifa Latif
09-10
$Robinhood(HOOD)$  $DJIA(.DJI)$ $NASDAQ(.IXIC)$  

Robinhood principally focuses on developing applications for cash management through financial instruments such as stocks, exchange-traded funds, options, and cryptocurrency. It mainly focuses on the US retail market and plans to expand into the UK. It also offers debit cards; monthly subscription account services with access to deposits and professional research, learning, and education solutions; and retirement accounts to users.

Investment Overview

Pioneer in commission-free brokerage. By being the first mover to offer commission-free and easy-to-use trading services, Robinhood has successfully captured many less advanced yet tech-savvy investors. It has become one of the largest retail brokers by customer count with over 23m funded accounts. To deepen client relationships and increase profitability, it has been expanding its product suite by including crypto trading & wallets, debit cards, and retirement accounts. The company is also planning a market expansion into the UK.

Turning profitable. The company is on track to achieve positive GAAP profit in FY24F thanks to (1) more active client activities amid the equities and crypto bull run, (2) higher interest rate that brings higher cash return, and (3) proactive cost management. It has also showcased its strong operating leverage with EBITDA margin expanded by 13ppt y/y to 44% in 2Q24. We believe the aforementioned product and international expansion will also bring structural growth to the company.

Expected rate cuts yet to a near-term headwind. The expected rate cuts starting from Sep'24 will compress net interest income, particularly the income from clients' idle cash. The company guided each 25bps cut would lead to USD40mn decrease in profit. We are cautious on the potential stimulation on trading activities from rate cuts, as the hype around tech stocks and crypto are cooling off.

Global economic slowdown, prolonged high market interest rates, noticeable contraction in market liquidity, and a substantial correction in global asset valuation.

@MillionaireTiger @TigerEvents @Daily_Discussion @TigerStars 

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