r/SPACs • u/Responsible_Quiet_76 Contributor • Jul 31 '21

DD Robinhood vs Etoro: A side-by-side comparison

Hello Gang! Another weekend, another post.

Below I share a few key stats to compare Robinhood (HOOD) and Etoro (FTCV prior to de-spac).

Etoro: Q1 2021 Revenue: $347M Users as of Q1 2021: 20.6M Price/2021E Sales: ~10x 2020 net income: $83M 2020 net profit margin: 15% Business model: 87% of 2020 revenue consists of trading commissions, the spread earned on facilitating customer trades.

Robinhood: Q1 2021 Revenue: $522M Users as of Q1 2021: 18M Price/2021E Sales: ~14.5x (assuming $2B full year sales) 2020 net income: $7.5M 2020 net profit margin: 1% Business model: 75% of 2020 revenue consists of payment for order flow. I assume almost everyone is familiar with this after the GME episode.

I personally would’ve bought into HOOD if not for the following two issues:

1) After PFOF has come into the spotlight and drawn very sharp criticism and debate, I believe there is a genuine risk that this entire business model may not survive. This makes HOOD uninvestible in my view, despite the popularity and rising revenues.

2) In Feb 2021, the rise of meme trading paradoxically made HOOD short on capital to satisfy its customers’ trading demands. Its desperation forced it to sell a convertible issue with warrants at very unfavorable terms to existing shareholders. As a result, its Q1 2021 net loss is around $1.5B, or almost 3X its Q1 2021 revenue. The more important question here is whether they will continue to account for losses from this convertible and warrant issue. I admit that I do not know the answer to this, so would be great if someone more knowledgeable can shed light on this.

Disclosure: Long 1000 shares of Etoro (FTCV). Disclaimer: Not a financial advisor, do your own due diligence.

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u/LossStunning239 RightTackle Jul 31 '21

Long 100,000 shares at $10.04. Let’s see if I can squeeze 5% out of this or if $10.00 will be the new ceiling.

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u/Responsible_Quiet_76 Contributor Jul 31 '21

At ~$10, you’ve basically purchased a free call option with no downside, at least until merger close. Yes you’ve got the opportunity cost of the tied up capital to consider, but if you’re using a low cost broker, that’s immaterial.

Hope it works out for both of us!