What Is a Better Investment Right Now: Robinhood or Coinbase?

Coinbase and Robinhood are brokerage platforms that have gained massive traction since 2020. But which is a better stock right now?

Oct. 2, 2021

This year, two broking giants made their debut on the equity markets. While Coinbase Global (NASDAQ: COIN) listed its shares in April, Robinhood Markets (NASDAQ: HOOD) went public at the end of July.

Shares of Coinbase had a reference price of $250 and ended the first day at $328.28. It’s priced at $228.60, as of September 30. Robinhood priced its IPO at $38 and ended the first trading day at $34.82. Robinhood stock is trading at $42.80 apiece as of September 30.

Let’s see which millennial broking platform should be on your buying radar right now.

The case for Robinhood

Robinhood has gained in popularity over the years, especially among millennial traders. Its easy-to-use platform and free trades allowed Robinhood to expand its user base at an accelerated pace. This allowed the company to increase sales from $277.5 million in 2019 to $958.8 million in 2020.

Transaction-based sales accounted for almost 75% of total revenue for Robinhood while the rest was derived from a combination of subscription fees, interest on margin loans, and security lending.

In the first six months of 2021, sales almost tripled to $1.09 billion while monthly active users increased by 109% to 21.3 million. Robinhood is also generating a sizeable portion of sales from cryptocurrency trades, which was a key revenue driver in 2021.

At the end of Q2, Robinhood’s AUM, or assets under management, stood at $102 billion, more than tripling in the last year. The discount broker is also moving towards consistent profitability and reported an operating income of $119.27 million in 2020, compared to a loss of $105 million in 2019. In the last 12-months, operating profits grew to most $300 million. 

Wall Street expects sales to touch $2 billion this year and rise by 37% to $2.73 billion in 2022. Comparatively, Robinhood’s adjusted loss per share is forecast to narrow from $5.94 in 2021 to $0.15 in 2022.

The case for Coinbase

Coinbase is the largest cryptocurrency exchange in the world and is growing its financial metrics at an enviable pace. Its revenue in Q2 of 2021 increased to $2.23 billion, compared to just $186 million in the year-ago period. Comparatively, net income rose from $32 million to $1.61 billion in this period. This stellar growth was on the back of robust trading volumes that increased to $462 billion in Q2, from just $28 billion in the prior year quarter.

While the trading volumes of cryptocurrency exchanges have been tied to the prices of Bitcoin and other major digital assets, Coinbase showcased its resiliency in the June quarter when the market experienced a sell-off.

Coinbase’s assets on its platform declined from $223 billion in Q1 to $180 billion in Q2. But this decline was offset by an increase in trading volume. Further, the crypto heavyweight enjoys massive operating leverage as its net income soared by more than 50 times compared to a 12-fold increase in top-line in Q2.

The bottom line

We can see that both Robinhood and Coinbase are growing at a breathtaking pace, making them attractive to investors who aim to beat the broader markets. But Coinbase’s lower valuation metrics and improving profit margins make it a better bet compared to Robinhood right now.

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