Robinhood (NASDAQ: HOOD) has made some serious moves in 2024, and it’s not just surviving—it’s thriving. While its 2021 rise was tied to the Zero Interest Rate Policy (ZIRP), Robinhood is now reaping the benefits of the “Peak Interest Rate Policy” (PIRP) as rates begin to drop. According to Bernstein analysts, the company is evolving into a sustainable business with better economics. Let’s break down the 5 key reasons behind Robinhood’s recent surge, which has seen its stock soar 30% in the past month and nearly 100% year-to-date.
1. Assets Are Growing, Not Just Trading Revenues
Robinhood’s success is no longer just about trading. The company’s assets under custody have exploded to $140 billion, a massive 57% increase year-over-year by Q2 2024. What’s even more impressive is that the average customer’s assets have more than doubled, going from $2,800 to $5,800 per account. This means more people are trusting Robinhood with their money. They’re also attracting new deposits with competitive perks, like a 1% incentive for transfers and attractive yields on uninvested assets.
2. Transaction Revenues Are Back in Action
Trading is making a comeback. Robinhood’s trading volumes have skyrocketed across its key products, with equity trading up 57% and crypto trading jumping a whopping 135% year-over-year. Bernstein points out that transaction revenues have bounced back to 50% of total revenues, after hitting a low of 40% in Q2 2023.
3. Crypto Is on Fire
Robinhood is riding the crypto wave in a big way. Crypto revenues surged by 160% in the first half of 2024, and according to Bernstein, Robinhood is set to benefit even more as the next crypto bull cycle rolls in. Their recent acquisition of Bitstamp opens up new revenue opportunities in stablecoins, staking, and derivatives. Robinhood’s crypto game is stronger than ever.
4. New Products and Global Expansion
Innovation is key, and Robinhood is delivering. From launching new services like the Robinhood Wallet to expanding perks for Gold customers and even rolling out a retirement accounts program, they’re not slowing down. Bernstein also highlights Robinhood’s aggressive global expansion, with new launches in the UK and Europe, setting them up for even more growth.
5. Strong Operating Leverage
Robinhood has tightened up its costs in a big way. They’ve cut operating expenses (excluding SBC) from 160% of revenues in Q1 2022 to just 60% by Q2 2024. With 90% of their costs now fixed, and revenues climbing, Robinhood is in a great spot. Bernstein predicts that Robinhood could hit $900 million in positive operating income by the end of 2024.
What’s Next for Robinhood?
With all this growth, Bernstein is sticking to its Outperform rating on Robinhood, with a price target of $30. But is Robinhood facing new challenges? With stocks skyrocketing in 2024, investors are feeling unsure about where to put their money next.
If you’re not sure where to invest, a great strategy is to check out top-performing portfolios. For example, Investing.com’s ProPicks found 9 overlooked stocks that gained over 25% this year. Could Robinhood be one of the next big winners?
Stay tuned—Robinhood’s breakout is far from over!