---
title: "Robinhood: Is the king of retail investors in the U.S. facing tragedy?"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/dolphin/post/24939611.md"
description: "After looking at the third-quarter report of the king of American retail investors, Robinhood$Robinhood(HOOD.US), it is basically a capitalized tragedy. a. Customer acquisition has peaked, with only 100,000 new customers in the third quarter, and the average AUM per new user is around $100,000, which is not the same group of users as the two to three thousand dollars per user during the pandemic; moreover, new customers are hard to find, leading to further increases in customer acquisition costs. b. Commission-based income, broken down by assets, saw a slight increase in stock trading activity, but the monetization rate has dropped to 0.00129..."
datetime: "2024-10-31T09:22:38.000Z"
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  - [en](https://longbridge.com/en/dolphin/post/24939611.md)
  - [zh-CN](https://longbridge.com/zh-CN/dolphin/post/24939611.md)
  - [zh-HK](https://longbridge.com/zh-HK/dolphin/post/24939611.md)
author: "[Dolphin Research](https://longbridge.com/en/dolphin.md)"
generator: "portal-rs"
---

# Robinhood: Is the king of retail investors in the U.S. facing tragedy?

After reviewing the third-quarter report of the American retail trading king Robinhood$Robinhood(HOOD.US), it can basically be described as a capitalized tragedy.

**a. Customer acquisition peaked**, with only 100,000 new customers in the third quarter, and the average AUM per new user is around $100,000, which is fundamentally different from the $2,000 to $3,000 per user during the pandemic; moreover, finding new customers has become difficult, leading to a further increase in customer acquisition costs.

**b. Commission-based income:** Breaking it down by asset, stock trading activity saw a slight uptick, but the monetization rate has dropped to 0.0129%, and stock commissions actually decreased quarter-on-quarter; although the monetization rate for cryptocurrencies improved somewhat, trading activity declined, resulting in a drop in cryptocurrency revenue; only options trading remains relatively active, and with the commission per contract basically stable, options revenue has been maintained; **however, overall commission income in the third quarter also declined.**

**c. Interest income:** The fundamental issues are mainly twofold: 1. Interest rates have been cut, and although cash-type assets have increased, this type of interest income has declined; 2. The difficulty of borrowing securities has decreased: in the securities lending business, the yield on borrowed securities has also declined. Thus, the overall interest income has seen negative growth quarter-on-quarter, with only the financing business income holding steady.

Other income is relatively low, so I won't elaborate further.

**d. Expenses remain high:** Due to the difficulty in customer acquisition and the fact that personnel have already resumed growth, it is challenging to reduce expenses, which has led to a decline in profitability in the third quarter compared to the second quarter, with operating profit falling from 28% to 24%.

Overall, Robinhood's problems mainly lie in the revenue side, and the stagnation in revenue reflects deeper underlying issues, which I believe are mainly two points:

**a. Customer acquisition has peaked under the old model,** and acquiring new customers essentially means competing with peers like Charles Schwab for users. However, with the trading income per order already surpassing that of Charles Schwab, the so-called **low-price attraction is no longer there.** As it moves towards users with an AUM of $50,000 to $100,000, its product adaptability, without adjustments, is actually quite low.

**b. Among existing users, the ability to activate AUM and user assets is insufficient,** leading to low AUM users coming in, but their asset activity has not been sufficiently stimulated.

**c. There has been no discovery of a true second curve business,** leveraging its 24 million brokerage-type user traffic to cross-sell into new businesses, such as credit cards or small payments.

As a result, the outcome for the third quarter is: **commission-based business stagnation, interest-based business struggling in a declining interest rate environment, and no second curve.**

In this situation, it can be said that Robinhood's growth potential is basically gone, and the valuation should be adjusted to a value investment approach first 

Icon reference:

### Related Stocks

- [HOOD.US](https://longbridge.com/en/quote/HOOD.US.md)

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> **Disclaimer: This article is for reference only and does not constitute any investment advice.**