Robinhood Shares Surge on Strong Growth in Assets Under Custody

Robinhood Markets experienced a substantial uptick of nearly 13% in premarket trading on Thursday following a robust February growth report in assets under custody (AUC). 

The brokerage’s continuous momentum reflects a resurgence in cryptocurrency and stock trading activities.

Impressive Growth in Assets Under Custody:

Assets under custody (AUC) saw a remarkable 16% month-over-month surge, reaching $118.7 billion by the end of February. 

This marks the second consecutive month of breaching the $100 billion threshold and signifies the company’s robust performance in managing client assets.

Analyst Optimism and Projections:

Bernstein initiates coverage on Robinhood with an “outperform” rating, citing expectations of a significant nine-fold growth in cryptocurrency revenue by 2025.

The brokerage firm also anticipates substantial expansion in the cryptocurrency industry’s total market value, projecting it to reach $7.5 trillion by 2025.

Competitive Advantage in Crypto Offerings:

Robinhood’s competitive edge in cryptocurrency is underscored by its full-suite crypto offering within a regulated broker platform, positioning it favorably against other exchanges like Coinbase. 

Additionally, the brokerage benefits from competitive fees and traditional brokers’ reluctance to offer crypto trading services.

Continued Focus on Profitable Growth:

Despite challenges, Robinhood remains steadfast in its commitment to achieving profitable growth, as evidenced by its surprise quarterly profit announcement in mid-February. The company aims to sustain this trajectory, targeting profitable growth by 2024.

Robinhood’s performance is buoyed by increased activity from retail traders, particularly amid the soaring bitcoin prices and the S&P 500 index hitting record highs. Despite declining active users on its platform, Robinhood demonstrates resilience by enhancing revenue per customer.

Market Response and Growth Potential:

While Robinhood shares closed at a more than 2-year high on Wednesday, the stock remains below its IPO price of $38 in July 2021. 

However, the brokerage’s strong growth metrics and optimistic outlook position it for further market gains and expansion in the coming years.