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Robinhood (NASDAQ: HOOD) is an innovative fintech company that has soared over 920% in the past three years. However, its recent Q3 earnings disappointed -- largely because its crypto trading transaction revenue dropped even more than Wall Street expected. So much so that Robinhood's share price has fallen by over 20% in the past month, due to both its earnings miss and the recent turbulence in crypto and tech stock prices.
I think today's price of around $83 could present a buying opportunity because Robinhood is so much more than a cryptocurrency stock. In the next three years, the way we invest, spend, and move money around could change dramatically, and Robinhood's forward-thinking approach puts it at the forefront of this emerging financial world.
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Robinhood's low crypto trading revenue pressured the stock after its Q3 results. I can understand investors' concerns, but fluctuating trading volumes are normal for crypto and for Robinhood, as the table shows. Crypto is still a relatively new asset class, and trading volumes will swing all too easily from wild exuberance to doom-laden stagnation.
Looking back over the past few years, transaction revenue accounts for roughly 50% to 60% of total revenue. Crypto accounted for 8% to 25% of Robinhood's revenue.
Sure, the drop in crypto revenue is disappointing, but the bigger story is that its Q3 transaction revenue increased 19% year over year to $867 million despite that decline. Its customer base continues to grow, and its diversification efforts are paying off.
I view Robinhood's crypto trading in the same vein as its pioneering 0% commission on stock trading: It is one of many ways Robinhood is making investing accessible and meeting consumer demand. Interest in crypto has waned recently, but Robinhood is still collecting fees as investors trade more options, contracts, and equities on the platform.
Robinhood's diversification means crypto is just one string to its fiddle. It also offers round-the-clock trading, AI agentic trading, prediction markets, options, and banking products. It launched its own blockchain in July, and usage has soared -- in less than six months, it's become a top-10 blockchain by ecosystem size and revenue.
Tokenized assets are one reason the chain has grown so quickly. Real-world asset tokenization is a way to record ownership of assets, including equities, on the blockchain. It makes trading easier and cheaper, and Robinhood is already a strong player in this space.
Looking ahead to 2029 and beyond, it is innovation rather than diversification that makes Robinhood interesting. The past three years have already seen huge changes in the financial and investment landscape, including the growth of automation and AI trading. While it's hard to predict exactly what might emerge in the next few years, there's a very good chance that Robinhood will be ahead of the pack.
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Emma Newbery has no position in any of the stocks mentioned. The Motley Fool recommends Robinhood Markets. The Motley Fool has a disclosure policy.
Where Will Robinhood Be in 3 Years? was originally published by The Motley Fool
