Robinhood Markets (NASDAQ:HOOD) had a year to forget. HOOD stock opened at around $35 per share last summer and briefly hit a high of $85 per share. It seems like a distant memory now; HOOD shares are currently selling for less than $15 per share.
The company has become famous for its activities in managing the shortage of GameStop (NYSE:EMG) stock last year. When Robinhood removed the buy button from GME shares, many customers stopped trading through Robinhood’s app.
This was not the end of the company’s success, however. In fact, it’s worth noting that Robinhood’s initial public offering (IPO) didn’t happen until after the GameStop squeeze drama ended. This is therefore not the reason why Robinhood has seen its fortunes deteriorate lately.
On the contrary, a bigger problem is that business activity is simply not as high as it was last year. This is especially true in cryptocurrency; for much of the last year, Robinhood generated much of its revenue from Dogecoin (CCC:DOGE-USD) trade in particular. With Dogecoin and other cryptos even in crisis, business activity has declined, and therefore with it, Robinhood’s profitability.
Stagnation since the meme boom
Around the time when the CMA (NYSE:CMA) and the GameStop controversy peaked, Robinhood had around 21 million monthly active users. The app was consistently among the most popular in app stores. Robinhood enjoyed a cultural moment.
Since then, however, Robinhood’s numbers have generally started to go in the wrong direction. Right now, Robinhood is closer to 18 million monthly active users. Part of this is likely due to the social media movement to leave Robinhood after the infamous GameStop removing the buy button incident. However, we are now a year away from that event, and Robinhood is still struggling to recover its user count.
Much of this is likely due to what is and isn’t working on Wall Street right now. Cryptocurrencies are out of fashion these days. The same goes for meme stores like GameStop. Tech stocks also fell, at least until last week. Major new stocks in the market, such as oil and gas companies, tend to be less popular with young, tech-savvy market participants who favor the Robinhood app.
Some new features on the way
However, Robinhood hasn’t stopped innovating. It now plans to launch several new features that will help it catch up with older, more established brokerage firms.
One of them is a Robinhood payment card. This will allow users to purchase goods with funds directly from their Robinhood brokerage account. There will also be incentives to use the payment card frequently. This isn’t a new feature for brokerage accounts, but it will help level the playing field between Robinhood and other companies.
Another novelty will concern securities lending. Robinhood users will be able to lend their shares to short sellers and earn interest on that loan for doing so. This is another feature that full-service brokers already have that will make Robinhood more competitive to match.
However, this may cause controversy for Robinhood. After all, many traders focus on meme stocks that also have a high degree of short sellers involved in these companies. Some traders may see Robinhood opening up securities lending as something that will help short-sellers and hurt meme stocks. Given Robinhood’s loaded history in terms of handling the GameStop situation, this may require a careful message from Robinhood not to alienate some customers.
HOOD Stock Verdict
I generally believe that if a company has a large and engaged user base, it has a chance of succeeding. Say what you will about Robinhood’s missteps over the past year. Mistakes were made along the way.
However, Robinhood still has nearly 18 million monthly active users. It’s a huge number. Robinhood’s reliance on meme stocks and cryptocurrencies in 2021 doesn’t seem to have been a lasting formula for success. But all these users are still there. Robinhood just needs to find the right business model to fit their customer base. Maybe things like cash card will be a big part of the solution.
When HOOD stock opened at around $35 per share, it took some pretty bullish assumptions to make sense. At $13, however, the math is much less demanding for bulls. As such, while Robinhood still has a lot to prove, a speculative long position here might make sense.
As of the date of publication, Ian Bezek had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.