2. Robinhood
Robinhood is a financial technology company that owns perhaps the most famous stock trading application in the world. It is ranked second on our list of 10 best fintech startups investors are flocking to. The company has raised more than $5.6 billion in funding so far over twenty-three rounds, with the latest round in February raising more than $2.3 billion. Some of the lead investors in Robinhood include Ribbit Capital and Index Ventures, among others.
As the fintech sector explodes, stocks like Square, Inc. (NYSE: SQ) have become an investor favorite over the past few months. On June 4, the share price of the company jumped close to 3% as CEO Jack Dorsey outlined plans for a Bitcoin hardware wallet. Square, Inc. (NYSE: SQ) is one of the largest institutional holders of Bitcoin.
At the end of the first quarter of 2021, 92 hedge funds in the database of Insider Monkey held stakes worth $9.2 billion in Square, Inc. (NYSE: SQ), up from 89 in the preceding quarter worth $8.8 billion.
In its Q1 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Square, Inc. (NYSE: SQ) was one of them. Here is what the fund said:
“We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).
The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown
from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.
We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of Square’s future value will be from its Cash App business.”
