I avoid investing in meme stocks. HOOD has been one since it’s IPO.
After its historic dip, I have been thinking is it a good long term investment? Based on my understanding, answer is still ‘no’ for the following reasons:
1. Payment for order flow is not a hugely profitable business model. Moreover, it may be banned in future by regulators.
2. Robinhood has gamified the investment so that users can trade more frequently. More trades, more order flow! However, regulators don’t like that. They may ask Robinhood to not gamify it.
3. Robinhood doesn’t manage assets like Charles Schwab or Fidelity. So, there is no ‘other’ source of income
4. Robinhood is trying to get onto crypto but there are already well established players.
Any comment to prove me wrong is greatly appreciated.
#Investment #robinhood
TC:230k + paper money
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comments
If robinhood want to succeed they need to regain trust from their main customers. So first thing is to have the Bulgarian boy step down and then run a campain to regain trust
They are more innovative than the other brokerages. And as RH continues acquiring more assets, the other brokerages will lose their upper hand.
RH = zoomers. Other brokerages = boomers
i vastly prefer fidelity ui
The investment on the other hand becomes more and more compelling as the stock price goes down especially - the key is to know what the right price for such a company. They have plenty of cash - about 6 dollars a share, their product roadmap is great, the user spend is very low and can only increase, the losses are not very high if you think operationally - most of it is compensation. So the question is what is the right price ?
I think it is worth at-least 30 - I am considering that every user is worth 1000 dollar in lifetime value - currently they generate around 64 dollars per user per year but I think that will go higher and I think they can generate atleast 1000 dollar per user over 5 years. If you multiply 20 m users by 1000 - that will come to around 20B. Add 6B cash + exciting products in roadmap - it can go towards 25-30B value which is in the range of 30 dollars per share
If every user is worth say only 200 - still the value is around 10 per share if you add cash and some product roadmap premium. So risk reward seems to be great in this investment
https://www.fool.com/the-ascent/amp/research/largest-stock-brokerage-firms/
It’s not an apples to apples comparison as not all brokerages are full service brokerages - but Robinhood has retirement accounts in their 2022 plan