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Robinhood's Trading Volume Explodes Thanks to 24-Hour Trading

Robinhood Markets has seen a remarkable increase in trading volume since the launch of 24-hour trading last year, with more than $10 billion traded overnight. This new trading option, available Sunday through Friday between 8pm and 7am ET, demonstrates the platform's increasing flexibility and appeal to investors who want to be active outside of regular market hours. Remarkably, off-hours trading volume accounted for as much as 25% of total daily trading volume on the busiest days, an indicator of increased user engagement.

In February, Robinhood saw an impressive $80.9 billion in stock trading volume, a 36% increase from the previous month. Presumably, the AI success stories are motivating investors to invest more again. The increased appetite for risk was also reflected in a 10% increase in the trading volume of cryptocurrencies to $6.5 billion and a 12% increase in the trading volume for options contracts to $119.1 million. Daily average trading revenues (DARTs) increased by 12% M/M and 19% Y/Y for equities, 14% for options and 50% for crypto compared to the previous year. Following the release of these figures, Robinhood shares by rose double-digit percentages on Wednesday, March 13.

Assets under custody reached $118.7 billion in February, an impressive 16% increase over January 2024 and 59% year-over-year, reflecting the financial strength and investor confidence in the platform.

Robinhood's positive performance confirms the trend of the surprisingly strong quarterly results for the fourth quarter of 2023, which I reported on in my stock screening in mid-February. With the share price rising to a 52-week high and a Second consecutive quarter of positive GAAP EPS, as well as revenue growth of 24% to $471 million and record EBITDA of $536 million in 2023, Robinhood is demonstrating significant improvement in revenue and profitability. These results are based on increased user activity, improved monetization strategies and increased efficiency, which together provide a robust foundation for future growth.

Robinhood's investor base, primarily from Generation Z, with average account sizes around $4,000, is gaining experience, especially after the 2022 bear market. Despite its propensity for speculative investing, the current market phase offers Robinhood a tremendous opportunity. A sustained boom in equities, supported by increased media attention and rising trading volumes, could further boost the platform. Retail investors are reacting quickly to gains and redeploying capital into new, attractive investments, which is also driving trading volumes. Platforms such as Robinhood tend to outperform market indices in such phases.

However, caution should be exercised when evaluating growth and financial metrics, as the volatile business model of brokers does not necessarily allow for linear forward projections. Although the stock has gained 40% since my report 3 weeks ago, analysts' projected P/S ratio for 2024 has fallen from 5.5 to 4.9 in that time. Mahika Sapra, analyst at Sanford C. Bernstein & Co, thinks that both the buy and sell side fail to recognize that there will be a "monster of a crypto cycle over 2024-25". It expects the market capitalization of cryptocurrencies to reach $7.5 trillion, compared to the current level of $2.6 trillion. With Generation Z in particular trading cryptos, she sees Robinhood as one of the top beneficiaries with a price target of $30, more than 80% above the current price.

Conclusion: In conclusion, given the fascination around AI success stories such as NVIDIA or Super Micro and the growing investor interest in such opportunities, Robinhood's outperformance is likely to continue.

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