Hey there. I'm going to imagine you mean Robinhood the stock and not Robinhood the brokerage.
The stock is on a torrent run here in 2024 and actually generates a significant amount of free cash flow relative to its revenue. The difficulty here is the bulk of the company's revenue, at least the most profitable segments of it, come from revenue segments that benefit the most when markets have a lot of speculative activity.
When we look to the primary growth drivers for the company, they come from cryptocurrency and options. I have attached a chart of the company's overall revenue makeup. Keep in mind this is only transaction based revenue, which makes up about half of the total revenue for the company, but my main concern here would be in any sort of bear market or even potentially a flat market, options and crypto revenue will no doubt face substantial volatility and likely impact results in a big way. Equities may remain stable or experience a lower drop, but it is a smaller portion of the total business.
This is exactly what happened in 2021/2022 as well. The markets turned to "risk-off", Robinhoods transaction based revenue fell by over 40%, and the stock price tanked.
The brokerage seems to be more aligned to be a digital casino than a long-term investing platform, which is unfortunately going to expose it to a lot of the cyclical nature of speculative markets. It's not really one I'd look to own.
