To The Moon

$Robinhood(HOOD)$ is scheduled to announce Q4 earnings results on 13 Feb 2024 after market close.

The consensus EPS Estimate is $0.07 and the consensus Revenue Estimate is $452.78M (+19.2% Y/Y). Robinhood have been focusing heavily on developing new products and entering new markets, including its cryptocurrency offerings.

Robinhood further reported $52.9 billion in equity trading volume and 95.3 million options contracts traded. Margin loan balances edged down to $3.4 billion, while total cash sweep balances rose 9% to $15.2 billion at month's end. The majority of the increase came from Robinhood's Gold cash sweep product.

Prevalence Of Stock-Trading Apps

According to study by the Federal Reserve Bank of New York's Liberty Economics, adults under 40 years old saw their wealth rise rise more than middle-aged or older adults since 2019, for individuals 39 and younger, wealth surged by a whopping 80%.

Contrast that with those 40-54, which saw wealth increase by 10% and those 55 and over, which logged in a 30% gain. Financial assets contributed the most to the increase. For those under 40, the real value of their financial assets rose more than 50% between 2019 and 2023. The 40-54 group saw only a 3% rise, and the over-50 cohort experienced a 20% boost.

The under-40 group likely bulked up on equities and mutual funds during the period. The proportion of their financial assets in corporate equities and mutual funds increased to 25% from 18% in Q1 2019. That's a 39% increase. Meanwhile, the over-55 cohort saw their equity/mutual fund portfolio share increase by 12%, and the 40-55 group saw their equity/mutual fund portfolio share decline to 25% from 30%.

Robinhood could benefit from this new wealth rise for customers who are under 40 years old, because if we look at the age distribution visit to the robinhood.com, we could see that the highest age group is under 40 years old.

These are the people who are likely to have invest with Robinhood and also uses their services.

Passive Investing Changing To Active Soon

According to Jill Carey Hall, U.S. equity strategist at BofA Global Research, passive investing has become more popular than active investing in the U.S., but the trend may be changing soon.

Active investing means buying and selling stocks or other investments regularly, while passive investing refers to the buy-and-hold strategy, where buying and selling is minimized. One of the most common forms of passive investing is index investing, where investors put their money in funds that track a broad market index, such as the S&P 500 SPX.

Robinhood also reported fewer monthly active users, which fell 16% to 10.3 million in the third quarter from the same period last year. Although third-quarter revenue rose 29% to $467 million, it fell short of the $480 million analysts were predicting. Its net loss narrowed to $85 million, or 9 cents a share, and topped Wall Street’s expectations.

This change from passive to active might be good for Robinhood as this should increase the number of active users in the US for Robinhood where most of their customers reside.

Robinhood Reports Higher Assets and Volumes

Robinhood reported 23.3 million net cumulative funded accounts at the end of November, an increase of about 20,000 from October. Additionally, assets under custody (AUC) climbed 12% month-over-month (MoM) to $94.4 billion. The company saw $1.4 billion in net deposits for the month. In terms of trading volumes, equities and options activity remained relatively flat compared to October,

This might be a concern as 4th quarter AUM might look flat, but the revenues from other services should be able to make up for it.

Robinhood (HOOD) Crypto Trading Volumes

Robinhood crypto trading volumes rose roughly 75% in November. Crypto trading volumes on Robinhood in November were roughly 75% above October levels in aggregate dollar value, according to early results disclosed by the company. For December, as we saw some cryptos having a short rally, December should fare pretty well.

Cryptocurrencies rallied last month, with Bitcoin climbing roughly 8% in November. We should see a significant contribution from crypto trading on Robinhood revenue and earnings.

Summary

As Robinhood has expanded its crypto trading offering to the European Union, though analysts note it is entering a crowded market, Robinhood has reported more recent momentum on the digital asset front amid a crypto rally in recent weeks.

Crypto trading revenue made up roughly 7% of Robinhood’s net revenue in the first nine months of this year. I would expect this percentage to go up. Bitcoin halving event might have more crypto investors adjusting their portfolio.

Another item I would look at is Robinhood’s valuation, it is currently below its peak of $20 billion in 2021, we have seen an improvement from 2022 to 2023, could it be improving its valuation for upcoming 2024.

I will look out for any guidance from the company on their outlook for 2024.

The platform supports 25 cryptocurrency assets. Customers receive a monthly bitcoin rebate, based on a percentage of their total trading volume.

Appreciate if you could share your thoughts in the comment section whether you think Robinhood would benefit from its crypto trading and hence earnings should have a higher weightage on it?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.