What Happened:
Shares of financial services company Robinhood (NASDAQ:HOOD) jumped 9.9% in the morning session after heavily shorted stocks (so-called meme stocks) continued to rally, with both AMC Entertainment (NYSE:AMC) and GameStop (NYSE:GME) up more than 60%. On May 13, 2024, famous Wall Street Bets (Reddit stock trading forum) trader Keith Gill (known online as Roaring Kitty) returned to Twitter (also known as X) after three years, fueling a greater retail appetite for meme stocks. These moves could also drive volumes on trading platforms such as Robinhood as more retail investors jump on the bandwagon.
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What is the market telling us:
Robinhood's shares are somewhat volatile and over the last year have had 18 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 2 months ago, when the stock gained 13.3% after the company provided its February 2024 operating data reflecting strong asset growth and higher trading volumes. Although its funded customers were only up by 130k compared to the previous month (23.6 million total), its Assets Under Custody (AUC) rose to $118.7 billion, representing a 16% month-on-month increase. This was driven by growing momentum in the public markets, which led to higher stock and cryptocurrency prices, and new inflows from existing customers into Robinhood's retirement products, which are offering customers a 3% match on any contributions. As a result, it wasn't surprising that volumes were up across all asset classes compared to the previous month. Notably, equity trading volumes were $80.9 billion (up 36% m/m) while crypto trading volumes were $6.5 billion (up 10% m/m). Given the increased platform activities, Securities Lending Revenue also benefitted and came in at $13 million, up 8%. Overall, the data showed Robinhood is performing well in the near term.
Robinhood is up 49.4% since the beginning of the year, and at $18.48 per share it is trading close to its 52-week high of $20.13 from March 2024. Investors who bought $1,000 worth of Robinhood's shares at the IPO in July 2021 would now be looking at an investment worth $530.59.
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