Even before zero-commission investing platform Robinhood (NASDAQ:HOOD) became a publicly traded company, it was well-known and sometimes controversial on Wall Street. So, when HOOD stock started trading on the Nasdaq, it was an immediate hit at first.
Ironically, many of Robinhood’s shares were traded on the company’s own platform. Yet, apparently the Robinhood crowd wasn’t able to keep the share price afloat. Now the stock is deep in the red zone.
Part of the problem is that there’s more than one high-visibility, low-commission (or even no-commission) self-directed broker out there. Indeed, one particular competitor in this space has been stealing some of the spotlight from Robinhood.
At the same time, though, Robinhood is still committed to changing and evolving, particularly as an advocate of blockchain technology. This could stand to benefit its downtrodden investors — maybe not today or tomorrow, but hopefully somewhere down the road.
A Closer Look at HOOD Stock
Just to recap, on Jul. 29, 2021, Robinhood priced its shares for the public at $38. Reportedly, Cathie Wood’s Ark Invest purchased around 1.3 million shares. It was an exciting time to invest in the company, no doubt about that.
It’s also possible that Reddit meme-stock traders helped push HOOD stock up soon after its Nasdaq debut. In any case, the stock peaked at $85 in early August 2021.
Back then, it was hard to imagine that Robinhood shares would ever fall below the initial public offering (IPO) price. Yet, this is exactly what transpired. Undoubtedly some investors are feeling buyer’s remorse right about now.
Fast forward to today and HOOD stock is down to the $13 level. There really aren’t any meaningful support levels to speak of, since the stock didn’t bounce off of any price points.
So, the best that we can do right now is to try to figure out what’s causing problems for shareholders. And what might offer a glimpse of hope for a turnaround.
Problems to Consider
There’s no denying that Robinhood has experienced a number of issues which may have contributed to HOOD stock’s decline.
First of all, there’s a financial issue to consider here. During the third quarter of 2021, Robinhood increased its total net revenues by 35%. However, the company still posted a disappointing net earnings loss of $1.32 billion.
Secondly, back in June 2021, U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler said that certain types of payment for order flow “raise questions about whether investors are getting best execution.” Gensler also said in a Barron’s interview that the practice of payment for order flow involves “an inherent conflict of interest.”
Finally, Gensler stated that an outright ban of payment for order flow is “on the table.” This appears to threaten Robinhood’s business model, which depends largely on payment for order flow.
Transcending the Competition
Thirdly, though, we should consider the competition posed by Webull and others. Some buzz has also built up recently as U.K.-based banking app Revolut is launching commission-free stock trading in the United States.
Revolut could pose serious competition to Robinhood, as it’s designed to be a “super app” with which users can manage all aspects of their money.
On the other hand, Robinhood isn’t just letting the competition steal its market share without putting up a fight. And that battle, if Robinhood has its way, will be waged on the blockchain.
In order to transcend the competition, Robinhood must continue to innovate. In that spirit, the company recently launched a beta version of its cryptocurrency wallet and selected 1,000 customers from its wait list.
As of now, this development isn’t yet listed on Robinhood’s news page. That’s surprising — it could be a game changer HOOD stock as well as all self-directed brokerages.
Back in October, Robinhood CEO Vlad Tenev said that demand for the crypto wallet had been strong. It was also reported that Robinhood’s crypto wait list had more than 1 million customers.
The Bottom Line on Robinhood
Only time will tell whether the rollout of Robinhood’s crypto wallet will catalyze a turnaround in HOOD stock.
Still, it’s encouraging to see that the spirit of innovation — which propelled Robinhood to celebrity status in the first place — is still there.
Going forward, it would be great to see Robinhood introduce more tech-focused products and features. Otherwise, the competition could further encroach on market share, thereby signaling hard times for the company and its stakeholders.
On the date of publication, David Moadel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
