Raymond James on Robinhood (HOOD): 'Options Leverage Lets Robinhood Turn Small Accounts Into Big Revenue'

Raymond James analyst Patrick O\'Shaughnessy reiterated a Market Perform rating on Robinhood Markets (NASDAQ: HOOD)

The analyst comments "Robinhood generates a remarkably high amount of revenue per client asset that is nearly 10x as much as Charles Schwab. This is largely the case because Robinhood generates a similar level of trading activity per account as Charles Schwab, particularly in options trading, despite a much smaller average account size. The implication is that account growth is likely to be the key long-term driver for Robinhood’s trading revenue going forward, whereas we see asset growth as the more important driver of non-trading revenue. On average, Robinhood generates ~200 basis points of revenue per average client asset, roughly twenty times more than Charles Schwab which generates ~20 basis points per client asset. This advantage for Robinhood comes despite investment securities representing the vast majority of Robinhood’s client assets, whereas spread-based assets typically yield higher returns. However, Robinhood’s yield on client securities holdings (inclusive of crypto) is north of 1% whereas Schwab’s is less than 0.10%."

For an analyst ratings summary and ratings history on Robinhood Markets click here. For more ratings news on Robinhood Markets click here.

Shares of Robinhood Markets closed at $54.65 yesterday.

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