Autonomous notes that the SEC appears to be taking a harsher stance on the money app business model
Amid the fight “to provide financial services for a new generation” that is “driving product innovation and customer satisfaction the incumbents may struggle to match,” Autonomous analyst Christian Bolu initiated coverage late last week of two “Neo Broker” stocks. Seeing Coinbase (COIN) “rapidly” losing market share, the analyst started the stock with an Underperform rating as he believes the company is “lagging on almost every crypto innovation.” On the flip side, Bolu sees Robinhood (HOOD) as an emerging winner that is entering “a huge monetization upcycle,” initiating coverage of the name with an Outperform rating.
BUY ROBINHOOD: Autonomous analyst Christian Bolu initiated coverage of Robinhood with an Outperform rating and a price target of $55 on October 8. The analyst believes a fight is under way to provide financial services for a new generation – millennials and generation Z as well as historically underserved demographics – with a combination of viral marketing, banking-as-a-service infrastructure, and a digital tech stack driving product innovation and customer satisfaction that “the incumbents may struggle to match.” Bolu pegs the revenue total addressable market at about $150B and sees Robinhood as an emerging winner.
After significant user growth in 2020 and 2021, the analyst expects future revenue growth to be primarily driven by increased monetization. This could triple Robinhood’s average revenue per user, or ARPU, over the next three to five years, he contended. Longer-term, Bolu argues that disruptive actions on deposit pricing and international expansion could power the next leg of account growth. The analyst also believes M&A optionality is underappreciated as strategically attractive deals could add up to 700 basis points to top-line growth while being up to 30% earnings per share accretive.
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