Robinhood share: steep climb or risky bladder for investors?

Robinhood share: steep climb or risky bladder for investors?

Menlo Park, USA - The Robinhood share enjoys remarkable popularity in 2024. With an increase of $ 12.63 to over $ 26, the value has more than doubled. However, this upswing raises questions whether the current momentum can be.

The trading platform, which is primarily known for its user-friendly app, was able to achieve sales of $ 682 million in the second quarter of 2024. This corresponds to an increase of impressive 40 percent compared to the previous year. As a result, Robinhood also recorded over a million new accounts, which indicates a growing interest in popular shares such as Nvidia, Apple and Tesla. But appearance is deceptive, because the monthly active users dropped from 13.7 million to 11.8 million in the same period.

Sale by Cathie Wood and its effects

Another aspect that could move investors in motion is the sales pressure of Cathie Wood, the founder of ARK Invest. It sold around 1.4 million Robinhood shares in early October, which corresponds to a value of $ 36.4 million. This happened just a few days before the share reached a 52-week high. Despite this sale, Robinhood remains a central component of ARK Invest portfolios, since the extreme sale is also to be understood in response to compliance with internal portfolio boundaries. However, investors could be concerned because this causes signs of a possible overvaluation of the company.

The evaluation of the Robinhood share is remarkably high, according to the specialist magazine Barron’s, which is based on data from Factset. It is currently being traded with 34 times the forecast profits of the next year. This is twice as much as for established competitors like Charles Schwab. This discrepancy could turn out to be risky, as some analysts fear that profits will not be sufficient to adequately justify the current market capitalization.

Robinhoods future under pressure

In addition, the dependence on inconsistent income flows represents a significant challenge. Over 40 percent of Robinhood's income comes from the storage of customer funds in so-called Sweep accounts. These accounts offer unattractive interest rates of only 0.01 percent. With falling trade volumes, as they are not unusual in the industry, this could lead to a critical revenue clamp. Previous declines of user numbers and losses of more than $ 4 billion in the past also throw shadows on the stability of the company.

The Federal Reserve's banking policy could additionally complicate the situation for Robinhood. Lower interest rates reduce the incentive for customers to have their funds in these low-interest Sweep accounts, which should affect the yields enormously.

regulatory uncertainties are also a big topic. Recently there was an agreement with the California Ministry of Justice regarding the crypto withdrawals that were not offered in Robinhoods Service from 2018 to 2022. Therefore, the regulatory observation, especially in the crypto sector, could endanger Robinhood's growth in this area.

Aggressive expansion into new product categories, e.g. in old -age provision accounts, brings further risks. The increased competition in the FinTech sector means that Robinhood may have difficulty holding its market shares.

More details on this topic can be found in a detailed report on www.finance.net .