Founded in 2013, Robinhood (NASDAQ: HOOD) changed the brokerage industry with its free trading model. Today, the broker’s product lineup has expanded well beyond stocks to include products like cryptocurrencies and prediction markets. With a focus on smaller investors, Robinhood is living up to its goal to “democratize finance for all.” But is becoming a full-service financial platform enough to make the stock a buy?
Robinhood is growing quickly
Although it was founded in 2013, Robinhood didn’t go public until 2021. In its first earnings release in the second quarter of that year, it had $102 billion in custody. In the first quarter of 2026, roughly five years later, that figure had grown to $307 billion, and it is now called total platform assets, given the broadening of the company’s business. The company has rapidly become a major player in the finance industry, building off its early success in attracting younger traders interested in stocks.
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There’s no question that management deserves a great deal of credit for what Robinhood has achieved. But that alone doesn’t make the stock worth buying. Notably, Robinhood is being afforded a premium valuation, with a price-to-earnings ratio of 45x, compared to P/Es of 39x for Interactive Brokers (NASDAQ: IBKR) and 18x for Charles Schwab (NYSE: SCHW). A growth investor may be able to justify Robinhood’s valuation, but a value investor likely wouldn’t be interested.
What’s going on with Robinhood’s customer base?
There’s another issue to consider here as well. With a focus on new investors, Robinhood may be taking on more risk than its long-established peers, such as Charles Schwab. This potential risk was highlighted in Robinhood’s solid first quarter 2026 results. Risk-taking is the big issue.
While Robinhood’s transaction-based revenue jumped 7% year-over-year in the quarter, that growth was largely driven by prediction markets, which boosted “other” revenue by 320%. Cryptocurrency-related revenue, however, fell by 47%. This is notable because it suggests that aggressive investors shifted to what is the current hot trading idea.
The problem is that Robinhood has never lived through a deep market downturn, such as the dot-com crash or the bear market associated with the Great Recession. Until it has, it is hard to know what its customers will do when every market seems to be heading lower, and losses are piling up. In other words, what will its customers do when there’s no new hot investment idea to jump on? There is a very real possibility that fear drives less experienced investors to get out of the market and stay out. Risk-averse investors will likely want to wait for Robinhood to be stress-tested before buying it.
