TLDR
- Robinhood shares hit $115 after climbing 172% year-to-date, up from $8 two years ago
- Platform assets reached $343 billion in October, growing from $102 billion at start of 2024
- Q3 transaction revenue rose 129% as crypto trading revenue jumped 300%
- New prediction markets business reached $100 million annualized revenue in under a year
- Stock trades at premium valuation of 44x earnings compared to 24.3x fair value estimate
Robinhood stock trades at $115 per share following a 172% year-to-date rally. The brokerage platform has transformed its business since trading near $8 just two years ago.
The company now manages $343 billion in platform assets as of October. That’s up from $102 billion at the beginning of 2024.
The growth stems largely from Robinhood Gold memberships. Users pay $5 monthly or $50 yearly for higher interest rates and premium features.
Gold members hold more assets and trade more frequently than standard users. This creates predictable subscription revenue beyond transaction fees.
Trading Activity Surges Across Products
Third quarter results showed revenue of $1.27 billion with earnings of $0.61 per share. Both numbers beat analyst expectations.
Transaction revenue jumped 129% to $730 million. Cryptocurrency trading led the charge with 300% growth.
Options revenue climbed 50% while equities trading rose 132%. Average revenue per user increased 82% to $191.
Net interest revenue grew 66% to $456 million. Higher interest rates boosted this income stream throughout the quarter.
Prediction Markets Gain Traction
CEO Vlad Tenev reported 4 billion prediction market contracts traded total. Over 2 billion contracts traded in Q3 alone.
The prediction markets product crossed $100 million in annualized revenue within its first year. October volumes suggest a $300 million annual run rate according to Bernstein analysts.
Robinhood plans international expansion for prediction markets. The company is engaging with regulators including the U.K.’s Financial Conduct Authority.
Management filed registration for Robinhood Ventures Fund I. The closed-end fund would give retail investors access to private companies.
Premium Pricing Raises Concerns
The stock trades at 47 times forward earnings. Industry peers average 23.6 times while the peer group averages 20.9 times.
Valuation models calculate a fair multiple of 24.3 times earnings for Robinhood. The current 44x multiple sits well above that benchmark.
One analysis shows shares trading 126.8% above fair value based on excess returns. The model factors in the company’s 22.82% return on equity.
Some bulls see potential for $160 per share based on product expansion. Bears place fair value closer to $50.
Recent volatility shows in the numbers. Shares dropped 12.4% in the past week and fell 23.2% over the last month despite strong year-to-date performance.
The platform continues expanding product offerings beyond traditional stocks. Management aims to capture more wallet share from retail investors through crypto, options, prediction markets, and private company access.
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