Mobile investing continues to see skyrocketing growth as more young people are looking to begin investing and planning their financial future. Since the pandemic, investing applications have exploded, with only a handful of companies now leading the industry.
By some estimates, around 75 percent of smartphone users currently use and interact with an investment management app. Younger generations seem to be the most active on investment applications, with around six in ten of American Gen Zs, those aged 18 to 25, having at least some investments, according to the CFA Institute.
Despite money markets undergoing a major shift in recent months, usership among these applications remain at stratospheric levels. For instance, E*TRADE is one of the world’s largest online brokers, seeing more than 8.2 million households making use of the platform’s trading tools, including its education catalog.
Robinhood Markets (NASDAQ: HOOD) had over 22.8 million funded accounts and approximately 15.9 million monthly active users (MAU) in 2022. Similarly, 50% of Gen Zs and 54% of Millennials make use of CashApp’s investing features to trade on the public market.
As demand continues to climb, and younger users begin to look for more convenient ways to invest their money and plan for their financial future, could these companies present investors with upside on the market, and should they be pricing in these stocks as part of their forward-looking strategy?
Robinhood Markets
Many investors might remember Robinhood Markets as being at the center of the GameStop (NYSE: GME) saga in January 2021. The investment platform, which was developed to expose younger would-be investors to the stock market, halted trading during the height of GME’s rout, leading many to call out the platform for helping hedge funds and having a hand in market manipulation.
Though the GameStop short squeeze was short-lived, Robinhood continued to hold a strong monopoly in the online investment and brokerage industry, especially among younger and less experienced investors.
Despite the negativity surrounding Robinhood’s position in the GameStop story, the platform remains a popular choice for younger investors looking to gain more exposure to the stock market, and those seeking to include alternative investments into their portfolio.
For seasoned investors, however, Robinhood remains an uncertain, but highly promising investment opportunity with growing upside potential. By current estimates, HOOD has a “Moderate Buy” rating, with at least 8 analysts giving the stock a buy rating, 6 hold ratings and 2 sell ratings.
HOOD has been attracting investors attention in recent months, with stock performance up by more than 65% since the turn of the year. Despite seeing muted gains throughout August, which was led by a decline in broader technology stocks, HOOD continues to push forward, with the potential to wipe off nearly all previous losses.
The second quarter came in strong, with the company reporting record-breaking revenue of $682 million, an improvement of 40% year-over-year. The company’s strong quarter witnessed better-than-expected transaction-based revenues, which rose to $327 million, up 69% year over year.
Earnings Per Share (EPS) had provided some upside for the company, with the recent recorded period delivering an EPS of $0.21 per share, a strong improvement compared to the same period last year, with EPS at $0.03.
Overall, the company delivered a surprisingly strong quarter, beating Zacks Consensus Estimates of $631.18 million. Revenue surprise was 8.05% above estimates, with EPS surprise 40% higher than expected.
A decent portion of the company’s revenues comes from paid subscription services, and during Q2, revenue for Gold Subscription services, the company’s top-tier option climbed by 19% to end the quarter at $70 million.
Additionally, the company reported an increase of 1.4 million investment accounts year-over-year, with a total of 24.8 million accounts active on Robinhood. Something which has stood out during Q2 earnings is that the company reported having over 2 million Gold Subscribers, with roughly 8% of all funded customers now being paid Gold Subscribers.
Robinhood provides a strong case, and for investors, there might be a possible near-term upside with HOOD. The company’s forward looking guidance remains in line with expectations of delivering full year revenues of $1.85 billion or $1.95 billion.
Additionally, second quarter results show that the company is planning to maintain investments in new products and features, with the eye on international expansion. Perhaps creating an international presence could give the company a significant boost, and in turn, allow them to take a bigger bite out of the market.
For investors, this could present an upside opportunity, with HOOD potentially outperforming the broader market. Unfortunately, this requires time, and will mean that investors seeking to leverage these opportunities might need to make a move on Robinhood before it’s too late.
Pros And Cons Of Investment Apps For Beginners
Many Canadians opt to invest through their phones by checking out different mobile trading apps and online investment platforms. Plus, it’s never been easier for them to manage their portfolios through their phones. After all, you have your phone with you every single day.
Such super convenient mobile investments can make you happy, sure, but they can also quickly ruin your day. They’re not without their pros and cons.
The Pros
Convenience
Investing now is so easy because you don't have to spend hours with a financial advisor or be glued to your desktop. You can buy, sell, keep an eye on your portfolio, and handle your money whenever and wherever you want with mobile investment apps. Whether commuting or just relaxing at home, all the information you need is just a few taps away.
Real-Time Updates
The financial markets are crazy and fast-paced, so keeping up with them is a must. With mobile apps, you get instant alerts about changes in the market, news that affects your investments, and changes in the success of your portfolio. With this information at your fingertips, you can easily make smart money decisions.
Lower Fees and Affordable Access
The standard way of investing has been shaken up by many mobile trading platforms that offer trades with no fees or very low fees. This makes investing a lot easier for people new to it or with small budgets. You no longer have to worry about fees cutting into your returns, which will help you get wealthy faster over time.
User-Friendly Interface
Mobile apps are a piece of cake to use. They’re designed to help you understand everything from the start and complete your investment. Even those who have never invested before can make smart decisions because of their step-by-step instructions, visual charts, and simple analytics.
The Cons
The Temptation to Overspend
You might be getting better and better at investing, but investing through mobile apps can sometimes be a double-edged sword. With everything being so easy and accessible, it’s quite easy to start over-allocating. Too many investments, especially those done impulsively or because of a short change in the market, can hurt your finances for good.
Security Concerns
Mobile apps are pretty secure but still vulnerable to cyber threats. If you're not careful where and how you log in to your bank accounts, your personal and financial data could be at risk. This is especially true with public Wi-Fi networks. Don’t ever access your financial information when being connected to one.
Limited Research and Analysis Tools
Mobile apps give you alerts in real-time, but they don't always have the powerful research tools you can find on desktop computers. Some serious investors want to dive deeper into financial reports, charts, and detailed analysis. They might not be able to access that from their phones.
The Dangers of Investing Online
You’re minding your own business, doing some trading on your phone, when you notice that all of your positions perish and the money's gone. Yes, online investing comes with serious cybersecurity threats.
Phishing Scams
Cybercriminals often use fake websites, emails, or messages to get you to give them your login information or banking data. Unfortunately, phishing scams are happening more often these days. Why? Well, hackers are getting smarter at tricking people.
Data Breaches
Plenty of legitimate mobile apps can fall victim to data breaches. A data breach is where a hacker gains unauthorized access to your personal information. This can lead to identity theft and financial loss if you don’t act fast.
Unsecured Networks
If you're managing your investments over public Wi-Fi, you could be putting your data at risk. Hackers can intercept your connection, gain access to your information, and leave you dry.
Tips for Improving Online Safety and Privacy
Protecting your online investments doesn’t have to be complicated. Here are some simple yet effective steps you can take:
Use a VPN
You might think, “I should hide my IP when investing on my phone," and you're right. With the help of a virtual private network (VPN), you can mask your IP address and never feel threatened by bad actors again. You're changing your location and name when you mask your IP address. This gives your online investments an extra layer of security.
Use a Two-Factor Authentication
This is also a great idea for your mobile investments. Keep them extra safe, even if hackers get a hold of your password. The second verification step will prevent them from damaging your finances.
Use Strong Passwords
If you are a hacker, breaching weak passwords is like stealing candy from a baby. Strong passwords might be harder to remember, but a password manager can help you create and store complex passwords securely.
