Retail investors love a good growth story. And one of the best ones in recent years has been that of Robinhood Markets (HOOD +1.40%). The fintech company's trading platform has made investing fun and exciting for young investors, which has led to tremendous growth for the business. Last week, investors also learned that the stock will be joining the S&P 500 (^GSPC +0.80%).
But that doesn't mean that the business has grown big and stale, or that it has run out of growth opportunities. What's appealing about Robinhood is that Chief Executive Officer Vlad Tenev is always on the hunt for new ways to expand, even if they can be a bit controversial, such as offering tokenized shares of businesses that aren't even publicly traded.
The company recently announced another big move, and this one could make its platform the ultimate one-stop shop for retail investors and traders alike.
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Robinhood to expand its prediction market business
Robinhood's platform is known for speculation and risk taking. From trading meme stocks to crypto, there's no shortage of ways people can make bets on its platform. And that's why its latest move of expanding its prediction-market business seems like a natural one. Allowing betting on sports can drive even more traffic onto its platform.
The company launched its prediction market last year, when users could bet on the outcome of the U.S. election. Now, it is launching prediction markets for the National Football League and college football. And what's unique about it is that rather than odds, buyers and sellers can negotiate on a price.
Expanding into sports betting can be a huge opportunity for Robinhood. Although there are plenty of places for people to bet on sports online, letting people do it on the same platform where they trade stocks and crypto can be a game changer. Not only could the move attract new users, but it may lead to more traffic from existing users as well. And if Robinhood adds more sports to its prediction markets, that can lead to even more growth potential in the future.
The company has been a growth machine
Robinhood has generated fantastic growth numbers as its business gets bigger and attracts more users. For the period ended June 30, net revenue rose by 45% to $989 million. And what's even more impressive is that its operating costs rose by only 12% during the past year, helping its net income to more than double to $386 million.
With solid profit margins and some promising growth prospects, especially as the company expands into more prediction markets, its bottom line should keep growing. And that can bring down its forward price-to-earnings ratio, which currently sits at 57, making it a more attractive buy for growth investors in the process.
NASDAQ: HOOD
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Robinhood's stock makes for a solid long-term investment
Although Robinhood's stock isn't cheap, I like where the business is headed. It pushes the envelope with things like tokenized shares of public companies, while it's also making logical moves into prediction markets, which closely aligns with the needs and interests of its core user base.
The stock has already soared more than 200% this year, which could be off-putting to investors who may think the stock has gotten a bit too expensive. And although that may look to be the case in the short term, if you're hanging on for the long term, then this can still make for a terrific investment, as Robinhood may be on the cusp of much more growth in the years ahead.
