Robinhood (HOOD): A Bull Case Theory

We came across a bullish thesis on Robinhood on Investing City’s Substack by Ryan Reeves. As of 1st July, Robinhood’s share was trading at $92.33. HOOD’s trailing and forward P/E were 52.76 and 65.36 respectively according to Yahoo Finance.

Robinhood, a discount brokerage firm, has been a game-changer in the financial industry by making stock trading fun and accessible with its user-friendly interface and ‘free’ trades. However, the company’s business model, which relies heavily on payment for order flow (PFOF), has raised concerns about its integrity. PFOF involves Robinhood taking a percentage of the spread between the bid and ask in a stock, with market makers like Citadel and Virtu paying the company for routing orders. This model has been criticized for potentially prioritizing profits over customers’ best interests, although regulations are in place to protect retail investors.

Despite these concerns, Robinhood’s business has been thriving, with 25 million funded accounts and $193 billion in assets under custody. The company’s average revenue per funded customer is around $120, with 60% of revenue coming from transaction revenue and 40% from interest revenue and subscriptions like Robinhood Gold. The company’s ambitious plans to expand its services, including AI equity research assistants, private banking, and real estate offerings, present significant growth opportunities. Robinhood Gold, a $50/year subscription, provides perks like 4.5% APY on uninvested balances and has already attracted 10% of users, generating over $130 million in recurring revenue.

The key to Robinhood’s future success lies in increasing its assets under custody per customer, which currently stands at around $7,700, significantly lower than competitors like Schwab. With a 35x growth opportunity, Robinhood has a long runway for growth, particularly in its banking offerings. However, the company’s lack of transparency about its business model may hinder its ability to garner trust from customers. By being more straightforward about its PFOF model and emphasizing its benefits, such as providing better pricing than national best bid and offer, Robinhood can build a loyal customer base and achieve long-term success.

Previously, we covered a bullish thesis on Robinhood by Brett Schafer in May 2025, which highlighted the company’s potential as a backdoor play on the AI energy boom through its critical energy infrastructure assets. The stock has appreciated by 43.74% since our coverage, as the thesis played out with the company benefiting from the AI energy spike. Ryan Reeves shares a similar view, emphasizing Robinhood’s growth opportunities in AI-powered equity research assistants and expanding services. However, Reeves focuses on the company’s core discount brokerage business, citing 25 million funded accounts and $193 billion in assets under custody.

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Disclosure: None. This article was originally published at Insider Monkey.