Coinbase and Robinhood have been two of the most highly anticipated IPO’s on the NYSE in the past 12-months, so we put them head to head in our Coinbase Vs Robinhood, to figure out which is the better investment!
COIN VS HOOD The Facts
Coinbase and Robinhood have both IPO’d within the last twelve months, both operate in a similar space and even compete against each other in some segments. Below are some of the key company metrics at the time of writing.
|Share Price||$258.26 USD||$55.01 USD|
|Active Customers||56millon||18million (2021)|
|Net Income (mM)||$1,061.81||-$1,384.85|
From the above Coinbase has a Market Cap of $USD52billion vs Robinhood’s USD$45billion, but this means little without diving into the fundamentals to see the underlying performance of the companies and compare the two giants.
Coinbase Company Overview
Coinbase is one of the go-to platforms for people wanting to invest in crypto the easy way. Coinbaes was one of the first platforms to make cryptocurrencies easy for people to buy and sell. The previous method prior to Coinbase involved terminal commands and remembering lengthy codes. A slide from one of the companies pitch decks illustrates this perfectly.
The company generates revenue via fees it charges on trades, maker and taker fees, interchange fees, interest on cash, sales of software tools, interest from personal loans, and more. This is thought to expand over time to include new services such as the Coinbase card, Coinbase Pro, etc.
Coinbase IPO’d on the Nasdaq on April 14, 2021, under the ticker code COIN with shares opening at $380 which was significantly higher than the reference price of $250 per share.
Robinhood Company Overview
Robinhood is an online discount brokerage that offers a commission-free investing and trading platform. Robinhood went public at $38 a share, giving it a valuation of $32 billion. The shares are listed under the ticker “HOOD” on the Nasdaq.
Before Robinhood, anyone who wanted to invest in stocks would be charged between $5 to $10 a trade. They also needed to invest a minimum of $500 to open an account.
At Robinhood, we believe the financial system should be built to work for everyone. That’s why we create products that let you start investing at your own pace, on your own terms.Robinhood Investor Centre
The company gets the vast majority of revenue from payment for order flow. The company similar to Coinbase also offer a Pro tier, cash management accounts. Buying and selling of fractional shares, options and bitcoin. In theory, Robinhood competes in the same space as Coinbase however, their offering is centred around share buying and selling.
Robinhood currently offers the below services:
- Trading in US listed stock and ETF’s
- Fractional Share Trading
- Options Trading
- Cash Management Accoints (similiar to Squares CashApp)
- Recurring Investment Plans
- Cryptocurrency trading (similiar to Coinbase)
- Robinhood Gold, our monthly paid subscription service that provides customers with premium features, such as enhanced instant access to deposits, professional research, Nasdaq Level II market data and, upon approval, access to margin investing.
Robinhood plans to expand internationally, focusing on Europe and Asia. It is also interesting to note in the company IPO filing to the SEC mentions in the future it hopes to become the most trusted, lowest cost, and culturally relevant money app. The term money app is interesting as it indicates that potentially Robinhood sees itself as more than an online broking business. However, it’s hard to pinpoint exactly what is meant by this.
The SEC in June said that it was conducting a broad examination of market structure, including payment for order flow. Robinhood said in its S-1 that an SEC ban of this practice would pose a “risk” to its business model.
COIN VS HOOD Revenues
We can see from the below that Coinbase makes over 2.2x the amount of revenue that Robinhood makes. Coinbase also appears to be growing revenues faster than Robinhood, hood delivered a 55% increase between 31/12/20 to LTM whilst in comparison, COIN has delivered an outstanding 133% increase in revenues in the same comparable period.
|Total Revenues (mM)||31/12/2019||31/12/2020||LTM 2021|
COIN VS HOOD Profits
Whilst Coinbase is generating significantly more revenue at this point in time, let’s take a look at the underlying businesses profit’s and profit margins to get an idea of what comes out of the bottom line.
Whilst the two companies are growing revenues at significant rates, the Net Income tells a very different story. Coinbase stock seems to have been able to grow Net Income in line with their revenue, whilst HOOD seems to have cost’s ballooning out of control.
|Net Income (mM)||31/12/2019||31/12/2020||LTM 2021|
In regards to the additional costs, Robinhood offered the below explanation in their prospectus documents
- Our total revenue grew 309% to $522 million, up from $128 million;
- We recorded net loss of $1.4 billion, which included a $1.5 billion fair value adjustment to our convertible notes and warrant liability, compared to a net loss of $53 million;
- Our Adjusted EBITDA was $115 million, compared to negative $47 million
Hence it will be interesting to see how the actual company Net Income adjusted for the provision compare with that of Coinbase.
COIN VS HOOD Market Capitalisation and Share Price
It’s a little hard to offer much commentary on the share price movements of Robinhood as it’s a recent IPO. The Price of COIN has seen a fall from the end of the first day of IPO price of $328.28 down to the current price of US$258. This is similar to the IPO reference price of US$250 slapped on it by brokers upon listing.
In terms of Market Capitalisation, Coinbase is once again the larger hitter. COIN has a market capitalisation at the time of writing of USD$52billion compared to HOOD’s USD$45billion. There seems to be a slight miss-math in the Price to Sales ratio for Hood at 33.97ttm, compared to 23.44ttm (trailing twelve months).
Google Search Traffic Overtime
In comparison with the amount of Google Search traffic, the two companies seem to have had similar baseline search traffic worldwide for the previous 12 months. There are a few comparable spikes for each of the companies. The Traffic in the US slightly favours Robinhood. It’s important to note that Robinhood is a US-only platform at the present time. This may give additional growth in the future.
Robinhood Vs Coinbase: Prophets Take
It’s important to note that Robinhood is a US-only platform at the present time. This may give additional growth in the future. This is compared to Coinbase who offers its product to 100+ countries at the moment including other large markets such as Asian and European countries. There is also at the present in our opinion a heightened regulatory risk with Coinbase shares due to the perceived nature of Crypto by governments. However, hopefully, this perception shifts over time.
Robinhood has also mentioned already that it plans to expand internationally, focusing on Europe and Asia.
We believe the competition between online discount brokers makes it hard for Robinhood Stock to generate excessive gross profits. However, over time we believe a similar circumstance will occur with Coinbase as discount crypto brokers are introduced to the market.
Due to the significant competition in fintech payments, cash management, cryptocurrency and online broking space, we see value in holding an ETF over this space rather than taking a significant bet in either Coinbase or Robinhood. Competition is only going to increase in the future as more companies look to enter the spaces. For example, Square’s CashApp could also be seen as a competition to the above in the future.
We hold neither of the above companies directly in our portfolio. We do however hold a significant portion of ARKF (ARKK Invest’s Fintech Evolution ETF). The ARKF ETF is a substantial hodler in Coinbase stock and holds 9.16% of the float. ARKF has also apparently started buying up shares in HOOD, however is not yet a significant holder.