• Robinhood introduced fractional share trading, with investors allowed to trade a minimum of $1. 
  • HOOD’s wild trading was attributed to sharp cryptocurrency movements in the past 7-days. 
  • The inclusion of new and first-time investors has propelled the rise of Robinhood, especially after FINRA approval. 

Robinhood (Nasdaq: HOOD) has gained 50.36%, closing at $70.37 as of August 4, 2021, from an IPO price of $38 on July 29, 2021. After-hours trading indicated the stock would lose 5.16% to trade at $66.51, possibly indicating an end to the wild-chase that has seen it escalate since it went public. 

Figure 1 HOOD Stock performance since IPO

Figure 1 HOOD Stock performance since IPO

The fintech and online brokerage company’s market value has risen 22.22% since the IPO, from $33,2 billion to $39.11 billion as of August 4, 2021. 

Rising revenue options

The platform offers a commission-free trading service where users can invest and trade in stocks, ETFs, options, ADRs, and cryptocurrencies. While not depending on commissions, HOOD recorded revenue amounting to $522.17 million. 

Users are allowed to pay premium fees for exclusive membership with the company’s revenue stream depends on the flow of orders. Other revenue channels include loans on stock and debit card fees (accrued during interchange) etc.

Cryptocurrencies have been the top movers in Robinhood’s bucket list, with Bitcoin surging 4.19% in the past 24 hours to trade at $39,879. The -0.70% price change in the 7-day BTC analysis was offset by Ethereum that soared 10.27% (in the past 24 hours to $2,742.60) and +17.99% in the past 7-days. 

Regulatory approval

HOOD is riding high after the US Financial Industry Regulatory Authority (FINRA) successfully adjudicated and consented after finding the company in violation of trade reporting malpractices. The company agreed to pay $70 million to compensate clients hit by non-disclosure as well as penalty payments. 

In Q1 2021, it was noted that HOOD’s clients had an average age of 31 with most being first-time investors. A total of 13 million users had joined the Robinhood brokerage app in 2021 from 2013. About 6 million users were added between January and February 2021. 

This revelation is crucial as many investors have emerged in the wake of the Covid-19 pandemic. Heading into Q2 2021, the company has been looking for ways to raise the median account size from $240 and the average account proportion from $5000.

The pandemic has led to an increase of first-time investors mostly from non-finance-related backgrounds such as nurses, former military personnel, teachers, students, and owners of small businesses. It increased its support staff from 900 in March 2020 to 2,700 in July 2021, indicating a surge in clientele during the restriction/ quarantine period. 

Fractional shares

HOOD announced the introduction of fractional share trading. These shares allow clients to invest in any preferred quantity with the minimum being $1 (0.000001 shares). New or first-time investors desiring to trade expensive stocks such as Berkshire Hathaway at $420,000 a share can choose to do so using fractional shares.    

In essence, $1 can be used to invest in more than 5,000 stocks and popular ETFs. However, these shares are illiquid or untransferable outside Robinhood. 

Technical analysis

In the four days, HOOD found support at $35.43. The stock is moving above the 9-day EMA at 67.08, suggesting a continuation of the uptrend. It may rise towards $84.84, where it met resistance. 

Figure 2- HOOD stock analysis

Figure 2– HOOD stock analysis

There is a falling selling volume as buyers continue to gain momentum. The 14-day RSI is close to the overbought zone at 67.08. If a bearish reversal occurs, the price may decline towards $63.79.