Robinhood struggles to find its footing – The Average Joe
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    Robinhood struggles to find its footing


    March 31, 2022

    Robinhood (NASDAQ:HOOD) is at a significant discount from its last year’s peak — and still the trading app isn’t looking too appetizing to investors right now. For those investing using Robinhood to trade, let’s hope its recent performance hasn’t ruined the app for you.

    Struggling to find a bottom

    Last week, Robinhood announced extended trading hours from 7AM-8PM EST. Per RDM Financial Group (via WSJ), trading outside normal market hours can be riskier with greater volatility and more difficult to execute.

    If you think it’s a ploy to collect more trading fees, you’re probably correct — which is desperately needed as growth slows:

    • Monthly active users declined 8% in the last quarter compared to the previous.
    • Sales peaked at $565M in the second quarter of 2021 — falling to $361M in the last quarter of 2021

    Robinhood is down 79% from its August peak — the entire fintech sector beat up as investors moved from overvalued stocks with large losses:

    The Global X Fintech ETF (NASDAQ:FINX) is down 35% and even big name, PayPal (NASDAQ:PYPL), is down 61% from 2021 peaks.

    Struggling to find new users

    …. But give them credit for trying with several new products planned:

    • Debit card deposits/withdrawals to make onboarding easier.
    • Adding tax-advantaged retirement accounts.
    • Crypto wallet and expanding crypto offering internationally

    Whether any of these new products translates to new customers is uncertain. Its core and new products are in highly competitive markets — and US consumer fintech apps are a dime a dozen.

    Growth was cheap during COVID — but future growth could cost more in marketing. Robinhood paid ~$15 to acquire customers at the start of 2021 — some industry brokers paying $600+.

    Investors: Uncertainty around Robinhood

    How does $HOOD look based on the tech bargain criteria:

    • Strong earnings? Losses have grown to $3.7B in the past 12 months — and the forecast isn’t looking good.
    • At least 20% sales growth annually in upcoming years? Uncertain unless retail investing activity picks up.
    • Lower valuation multiples than pre-COVID days? Lack of data as $HOOD went public in 2020.

    Robinhood failed in every category based on historical numbers and lack of data. It’s also a difficult business to forecast — which makes it even more difficult to invest in.

    Just because a stock is down doesn’t make it cheap — there’s no guarantee they’ll return to their historical peaks.

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