Robinhood Markets is overvalued.
Robinhood Markets, the stocks and cryptocurrencies brokerage company with clients mainly young traders, is valued now at 31 billion USD.
I estimate Robinhood Markets is worth around 17 billion USD based on its latest reported quarter Q1 2021 results.
I see two scenarios for Robinhood Markets. If Robinhood Markets becomes profitable, its market capitalization could top 100 billion USD in 5-7 years.
However, if Robinhood Markets remains heavily lossmaking as it is now, its value will hover around 17 billion USD for the next 3-5 years.
As can be seen above, I think that the current intrinsic value or Robinhood Markets is 17 billion USD. Robinhood Markets' clients, mainly young people, are taking on hugely risky trades, the risk of which I doubt they fully understand.|
Robinhood Markets' clients actively buy options, sell options short and sell stocks short. They trade with significant volumes when aggregated, which due to the several days settlement period for trades, may even endanger the entire financial system. Clearing houses which are the base of the trading financial system may all of a sudden realize they have required too loo margins from their brokerage companies clients, which could threaten the clearing houses with insolvency and basically endganger to bring down the whole financial system
All in all, I see Robinhood Markets as overvalued currently.
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