One growth stock that’s on fire right now is trading and investment platform operator Robinhood Markets (NASDAQ: HOOD). Since the end of March, it’s gained about 50%.
Looking ahead, I see potential for significant gains from here. Because not only is this company benefitting from rising stock markets and increased interest in investing, but it’s also exceptionally well positioned to benefit from the ‘Great Wealth Transfer’.
A true innovator
Robinhood’s an incredible company. Compared to UK investment platforms such as Hargreaves Lansdown and AJ Bell, it’s in a different league.
Today, it offers (deep breath) commission-free trading, fractional shares, crypto trading, prediction markets, options and futures trading, a platform for advanced traders, AI-powered stock analysis, social trading, private markets access, a credit card with numerous perks, bulk FX transfers, wealth management and retirement investing services… and more.
With Hargreaves Lansdown and AJ Bell, we don’t even have commission-free trading!
Rapid growth
Given this extensive list of innovative features, the platform’s incredibly popular, especially with younger investors. Today, the company has over 27m funded accounts globally, versus around 5m for Interactive Brokers and two million for Hargreaves Lansdown.
As more and more people invest with the company, its revenues are surging. Last year for example, revenue amounted to $4.5bn versus $1.9bn two years earlier.
Looking ahead, analysts expect the growth to continue. Currently, the consensus revenue forecasts for 2026 and 2027 sit at around $5bn and $6.2bn respectively.
One area of the business that’s expected to drive strong growth in the near term is prediction markets. Right now, interest in this form of betting is off the charts.
The long-term growth story
While this is all very positive, it’s the long-term story that really draws me in. Because, as I said at the top, this company’s very well positioned to benefit from the Great Wealth Transfer.
You see, around 75% of Robinhood’s customers are Millennials or Gen Z. Given that these generations are expected to inherit a large chunk of the $80trn or so that’s expected to be passed down in the next few decades, the firm could potentially see its assets under management surge in the long run.
It’s worth noting that the company’s fully aware of the opportunity here. As a result, it’s making moves to build lasting relationships with its clients, many of whom could be investing for the next three or four decades.
For example, it recently acquired TradePMR – a custodial and portfolio management platform for Registered Investment Advisors (RIAs) – to enhance its investment advisory capabilities. For those in the US, it also offers matched contributions on Individual Retirement Accounts (IRAs).
“The needs of Robinhood customers are evolving and they are seeking advice on how to build and manage their growing portfolios.”
Robinhood CEO Vlad Tenev
An investment opportunity?
Now, there’s no such thing as a free lunch in the investing world and this is very much the case here. There are numerous risks.
One is the crypto market. This is a key revenue driver for the company and when conditions are weak it can impact growth.
Another’s the valuation. The forward-looking price-to-earnings (P/E) ratio’s about 50, which is high and tends to lead to elevated levels of share price volatility.
Taking a long-term view however, I’m very bullish. In my view, this growth stock’s worth considering.
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Edward Sheldon owns shares in Robinhood Markets
