Shares of Robinhood Markets (HOOD -0.33%) have soared this year as the stock has been one of the biggest under-the-radar winners on the market.
The disruptive brokerage has benefited from a boom in cryptocurrencies, its new retirement account offerings, and new tokenization and crypto programs, showing it's finding new ways to monetize crypto. As it's grown, the company's profits have also soared, showing off the scalability of its business model.
Additionally, Robinhood has benefited from elevated interest rates as it's been able to earn a substantial interest income stream.
According to data from S&P Global Market Intelligence, the stock was up 151% through the first half of the year. As you can see from the chart below, the stock soared in the second quarter after the pause on "Liberation Day" tariffs was announced.
Robinhood catches a tailwind
After struggling through the crypto winter that occurred following the pandemic lockdown period, Robinhood has revamped its business with new revenue streams like its premium gold accounts, retirement accounts, and staking, and the stock has soared as a result, benefiting also from all-time highs in crypto.
The stock actually pulled back after its first-quarter earnings report came out at the end of April, though the results seemed to pave the way for the stock's growth over the next two months.
Revenue jumped 50% in the quarter to $927 million, ahead of estimates at $917.6 million. Transaction-based revenue jumped 77% to $583 million, driven by strong growth in both cryptocurrencies and options.
Generally accepted accounting principles (GAAP) net income jumped 114% to $336 million, showing its margins are expanding, and earnings per share jumped 106% to $0.37, matching estimates.
In May, the stock rose first on May 8 on news that the company was developing a blockchain-based platform to allow investors in Europe to trade U.S. securities. The following week, the stock jumped again in line with the broader market as the U.S. and China lowered their respective tariff rates. That brought on another surge in the risk-on trade.
Later in the month and in June, Robinhood benefited from positive developments around crypto regulations in government, and at the end of June, it launched stock tokens in the European Union.
Image source: Getty Images.
Can Robinhood keep climbing?
Robinhood's breakout has been impressive, and the company has continued to find new ways to disrupt the brokerage industry. However, it's a mistake to assume that its growth will continue on a steady plane as its business is sensitive to crypto interest and the broader bull market. If that fades, its growth is likely to slow and could potentially decline. That's not a reason for long-term investors to avoid the stock, but they should be aware that the business is inherently volatile.
