Robinhood’s ride to fintech supremacy has been almost as volatile as the meme stocks that trade on its platform.
Its IPO debut on July 28, 2021, ended with the stock down 8% to $34.82. Led by co-founders Vlad Tenev and Baiju Bhatt, then a clean-shaven duo with long, flowing locks, the company struggled to break the perception as a place for 20-somethings to buy one share of GameStop (GME) and call it a day.
In 2022, the company slashed headcount by 9% in a first round of cuts, then by 23% in the second. Its stock hit a record low of $6.81 on June 13, 2022.
Today, the business has finally begun to haul in major profits, and the stock is up a sizzling 220% this year. the rearview mirror.
Yet a plethora of product releases later, CEO Tenev is waltzing in for Yahoo Finance’s Comeback of the Year at our NYC headquarters. Tenev, now 37, sports shorter hair that’s on the cusp of looking like peers at corporate rivals Charles Schwab (SCHW) or JPMorgan (JPM). Sources have quipped he actually looks like the fabled character that takes from the rich and gives to the poor.
Today, the business has finally begun to haul in major profits, and the stock is up a sizzling 200% this year.
“I remember when we entered the public markets, it was sort of at the height of the secular bull market and we felt good. But the business now is much stronger across pretty much all dimensions. We have nine business lines that are generating over a hundred million in annual revenue,” Tenev said.
Robinhood co-founder and CEO Vlad Tenev (right) talks with Yahoo Finance executive editor Brian Sozzi about the company’s 2025 outlook after a comeback year in 2024. ·Yahoo Finance
Robinhood has gained back credibility by uncorking credible new initiatives that signal it’s serious about its next 10 years.
Even before the company debuted presidential election betting contracts pre-election, its product release and acquisition pace had picked up considerably.
In mid-October, Robinhood said it would launch futures and index options trading and introduced Robinhood Legend, billed as a sleeker platform that targets more sophisticated traders. Robinhood Legend will allow up to eight charts open in a single window and could elevate various technical indicators such as Bollinger Bands.
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June brought the acquisition of crypto exchange Bitstamp, while it scooped up AI-powered investment research firm Pluto in July. It also took aim at credit players American Express (AXP) and Visa (V) in March with the launch of a credit card that offers 3% cash back.
Tevev says his goal is to make Robinhood a one-stop shop for building generational wealth.
Combine the product drops with high interest rates, a crypto surge, and a leaner expense base, and Robinhood is reporting banner earnings.
Its third quarter revenue grew 36% year over year to $637 million. Net earnings improved sharply to $150 million from an $85 million loss a year ago.
Average revenue per user increased by 31% to $105. Gold subscribers hit 2.2 million. Total funded customers reached 24.3 million, up 1 million from last year.
For the nine months ended Sept. 30, total revenue has increased 39% to $1.9 billion. Net income has swung from a loss of $571 million to a profit of $495 million.
“Their account growth has been much higher, and as I look at the pace of increase, it was really like around the end of last year it picked up … It was in January where it sort of like stepped up [even] higher,” said Barclays analyst Ben Budish, who rates the stock a hold.
Account growth is a sign Robinhood is gaining market share from legacy trading platforms such as Interactive Brokers and Charles Schwab, experts tell Yahoo Finance.
For Tenev and his team, it’s on to the next year — then the next decade.
Robinhood said at its investor day that it’s focused on holding two more product events in 2025, including one dedicated to crypto in France.
“We’ll be able to launch some pretty innovative things that we’re getting excited about,” Tenev said.
Crypto could be an important tailwind as a pro-crypto Trump administration arrives. The Biden administration and outgoing SEC Chair Gary Gensler have largely been viewed as anti-crypto, or neutral at best.
Trump’s pick for SEC chair, Paul Atkins, and the appointment of tech venture capitalist David Sacks as crypto czar has the crypto community in a frenzy. Bitcoin sailed past $100,000 post-election.
“We’re very excited about Paul Atkins taking on the mantle and getting the agency pointed in the right direction,” Tenev said. “We’re also looking forward to the end of the regulation-by-enforcement approach.”
Tenev says Robinhood’s business could grow by 10 times over the next 10 years by widening its product reach. The aforementioned futures trading, which is projected to launch in early 2025, is estimated by the company to be a nine-figure business.
Vlad Tenev quote
It will also expand its events contracts business. Tenev didn’t rule out a potential foray into sports betting.
“We’re going to broaden that [events business out],” Tenev added. “There’s all kinds of contracts and events that are permissible that we’d want to allow people to trade.”
“Bull is the new base case [on Robinhood],” Wolfe Research analyst Steven Chubak said after its investor day. “We are confident in management’s ability to execute on growth initiatives and capture share in active trader and crypto.”
Chubak maintained an Outperform rating on Robinhood shares.
Robinhood will have a much higher bar to clear to keep investors happy moving forward.
Lower interest rates could weigh on interest-bearing assets. Trump may end up being less crypto-friendly than expected, or not move as quickly as crypto markets have priced in. And it’s hard to believe Charles Schwab will keep losing retail investors to Robinhood under new CEO Rick Wurster.
The stock’s valuation leaves little margin for error, trading on a forward PE multiple of 32 times, according to Yahoo Finance data. Charles Schwab and Interactive Brokers trade at 22 times and 28 times, respectively. The broader S&P 500 trades at 23 times earnings.
More than 70% of Wall Street analysts that cover Robinhood rate it a Buy or Strong Buy with an average price target of $43 (about 9% upside potential), per Yahoo Finance data.
Mizuho Securities analyst and Robinhood bull Dan Dolev told me on Yahoo Finance’s Opening Bid that he has a $60 price target on Robinhood and is banking on a bumper 2025 on the strength of crypto and stock trading.
“So the other side of Robinhood is it has been an ideal [environment this year],” Budish said. For next year, it “feels like it all depends on what happens to crypto.”
Whatever the case, Tenev contends he will be focused on preventing complacency among the rank and file.
“There’s a lot of things we could be doing better and we’re learning a lot of things. So even though we’re getting a lot of positive reinforcement, it’s definitely not time to declare victory or take our foot off the gas in any way,” Tenev said.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
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