Investors are starting to value Robinhood Markets (HOOD +6.95%) like a generational company in the making. The stock has had a great run over the past few years, and while it looks expensive with a market cap of $132 billion, Robinhood is just getting started.
The reason why it's not too late to invest is that there is so much opportunity ahead for this company. For example, Cerulli Associates estimates there is $84 trillion of wealth that will transfer to heirs in the next few decades. Robinhood has built a strong brand that resonates with the people who are going to inherit most of these assets. Buying the stock today will allow shareholders to grow their wealth right alongside Robinhood.
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Robinhood's innovation will attract more customer assets
Robinhood managed to gain over 26 million funded customers on its platform by offering a simple trading experience. The median customer age on the platform is 35, with 63% of its customers under 44.
The company is seeing its assets under custody explode as customers bring more assets to the platform. At the end of August, the company's total platform assets stood at $304 billion, representing a year-over-year increase of 112%.
NASDAQ: HOOD
Key Data Points
Customers will continue to bring more assets to Robinhood as it continues to innovate with new products and services. For example, Robinhood is building its own blockchain (Robinhood Chain) that positions the company for a future where assets can be transferred at lightning speed on the blockchain. CEO Vlad Tenev expects the tokenization of real-world assets to become widely adopted in the next five to 10 years.
This will be a huge innovation that could thrust Robinhood to the top of its industry. It opens the door for Robinhood's customers to participate in the growth of the most valuable private assets in the world, potentially including SpaceX and OpenAI. It has already introduced stock tokens for customers in Europe. Tenev sees tokenization completely disrupting the global financial system.
What about the valuation?
As it continues to roll out new products for customers, including banking and credit cards, it is going after a long-term addressable market of over $600 billion. This helps put the stock's valuation in perspective. Robinhood's trailing 12-month revenue is just $3.6 billion, which might not seem enough to justify its current valuation, but considering how big this company could be in the next 20 years, the stock could offer attractive upside.
