Robin Hood (HOOD) $17.73 HOLD – Its trading at a premium to its peers, will take another look if the price drops significantly.
Positives
Has a decent strong hold with retail trading community, a preferred broker to those who started trading during the pandemic – First Mover advantage.
Wide offerings in crypto trading and services – crypto is the largest revenue stream.
Negatives
Cyclical, commodity, not much difference between brokerages, at one time commission rates used to be a differentiator, then it was ease of online trading, which was a small differentiator for Robin Hood when it took of during the pandemic, now everyone catering to retail seems to be on par.
- Interest rates from the customers float drive a big chunk of revenue, and a large recessionary rate cut would likely erase most of that revenue segment.
Too much exposure to crypto volumes tank when crypto is down
Valuation
The stock is trading at a premium to its peers like Interactive Broking IBKR, which doesn’t seem justified.