6. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Holders as of Q4: 79
Ark Invest’s Equity Stake: $480.92 Million
Robinhood Markets, Inc. (NASDAQ:HOOD), headquartered in Menlo Park, California, is a leading financial services company known for its electronic trading platform and cryptocurrency wallet. In Q4 2024, the company reported revenue exceeding $1 billion, bringing its full-year total to over $3 billion, a remarkable 58% increase from 2023. This surge was driven by the successful launch of new products, including the Robinhood Gold Card, Robinhood Legend, and its expanding derivatives business, all designed to meet the needs of its active trading community. By broadening its product offerings and enhancing user engagement, Robinhood Markets, Inc. (NASDAQ:HOOD) has positioned itself as a key player in the financial technology sector, demonstrating its ability to scale operations while delivering substantial revenue growth.
One of its standout innovations, Robinhood Legend, has already generated $50 million in annualized trading revenue. The company also achieved a record $50 billion in customer deposits, marking a nearly 50% increase. Additionally, subscriptions to its premium Robinhood Gold service grew by 80%, with approximately 10% of all users opting for the membership. Notably, over 30% of new customers in Q4 2024 chose Gold, highlighting the increasing demand for Robinhood’s premium features. With strong financial momentum, expanding product offerings, and growing investor confidence, Robinhood Markets, Inc. (NASDAQ:HOOD) remains a compelling investment opportunity poised for continued success.
By the end of Q4 2024, institutional interest in Robinhood Markets, Inc. (NASDAQ:HOOD) had surged, with 79 hedge funds in Insider Monkey’s database holding positions worth $4.62 billion, a significant increase from the previous quarter’s 36 hedge funds with investments totaling $2.19 billion. This rising confidence from institutional investors underscored the company’s growth potential and set the stage for an impressive financial performance in the following year.
Baron FinTech Fund stated the following regarding Robinhood Markets, Inc. (NASDAQ:HOOD) in its Q4 2024 investor letter:
“We also initiated a position in Robinhood Markets, Inc. (NASDAQ:HOOD) during the quarter. Robinhood is an online brokerage that offers free trading across stocks, options, and cryptocurrencies. Baron Capital has long invested in successful brokerage companies such as Charles Schwab, Interactive Brokers, and LPL Financial. We first met Robinhood in 2021 during their IPO process. Customers were using Robinhood because of its low-cost offering and simple user interface that makes trading easy and accessible. While we were impressed with management’s success in building a modern brokerage with a large user base and strong product-market fit, we were hesitant to invest at a cyclical peak in trading activity and fintech valuations during the middle of the COVID-era meme-stock craze. Following the IPO, trading activity soon normalized, and the share price fell significantly.
After revisiting the company this past year, we believe Robinhood is a much-improved business today. Departing from its early reputation as a gamified enabler of retail speculation in meme stocks, Robinhood has been professionalized and transformed into a more durable company that can reliably gain market share and grow earnings over the long term. Some examples of the company’s maturation include: 1) providing retirement accounts that should create larger and longer-lasting client relationships; 2) launching the Gold subscription service that delivers additional value to Robinhood’s best customers; 3) introducing the web-based Legend platform that offers more advanced features for active traders; and 4) exercising expense discipline to right-size the cost base and deliver profitability alongside growth. These efforts have delivered strong financial results, with Robinhood generating annualized net new asset growth of 29%, custodied asset growth of 76%, and an adjusted EBITDA margin of 42% in the most recent quarter. Average revenue per user has also increased significantly from $60 in 2022 to $107 in the first nine months of 2024 across more than 24 million funded accounts. The customer retention rate is a very strong 95%, up from 80% three years ago…” (Click here to read the full text)
