The company's fourth-quarter earnings marked a return to profitability and the promise of significant growth. Gabe Jones – Bloomberg/Getty Images
I've written about a lot of public companies during my time as a technology and finance reporter, and I consider Robinhood to be one of the most interesting. That's partly because the company is good at product innovation, but mostly because of its compelling narrative: Robinhood believes it can move beyond its roots as a platform for 20-somethings to turn small YOLO stock bets into something more like full-service power brokers like Fidelity. And Charles Schwab.
At the same time, though, Robinhood has shown a habit of stepping on rake. That includes the time it had to order billions of dollars worth of stock dilutions to escape a collateral disaster, and several run-ins with regulators over Gonzo marketing and other fast-growth gimmicks. There was also a period when nearly a quarter of Robinhood's revenue came from introducing the new cryptocurrency Doge. Such events, combined with its volatile stock price, often made it seem like Robinhood was better suited to be a big acquisition for a big bank than a serious long-term brand.
However, that hasn't been the case in recent months, as Robinhood has avoided stupid mistakes while showing that it may have a long-term plan after all. That was reflected in fourth-quarter earnings released Tuesday, which marked a return to profitability and a promise of significant growth in the years ahead. HOOD shares rose about 20% on Wednesday as investors liked the rise in cryptocurrency and stock transactions and the increase in interest-related revenues.
This money from interest – which comes mostly from customer balances and margin lending – is not very high, nor is it a long-term path to growth. That's because interest rates can rise, of course, but they can also fall, and will likely do so before long, cutting into Robinhood's profits in the process. You can check out the details in these company slides, which are unusually revealing for the earnings report.
However, the more interesting question to ask about the latest earnings is whether the company's narrative — that it will grow into the Charles Schwab of the next generation — still seems achievable now that nearly three years have passed since Robinhood debuted. The answer is a careful yes. Robinhood now has about $1.7 billion in retirement assets (which came in part from an aggressive incentive program) while the average size of customer balances is growing. This fits with CEO Vlad Tenev's long-standing theory that its core customer base, who arrived mostly as poor YOLO types, will gain wealth as they age and will begin using Robinhood in the same way their parents did with Charles Schwab (which was self-destructive when They came onto the scene in the 1970s.)
Robinhood also has some intangible qualities that provide the means for long-term success. This includes the continued presence of Tenev, who, as with the other founders, has ensured that his company continues to innovate. Meanwhile, for those of you who think this is too rosy and want a reality check, here's one: Robinhood's total assets under management have grown by just $5 billion since 2021 for a total of just $103 billion. Compare that to Fidelity and Schwab, which respectively command about $11 Trillion And 7 dollars Trillion. Robinhood still has a very long way to go to reach the big leagues. However, this week's earnings were a reminder that the company still has the ability to surprise.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
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