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Robinhood Markets (HOOD +3%) maintains its steady upward momentum today following an upgrade to "Overweight" from "Neutral" at Piper Sandler. The trading platform has been looking to get back on target since last Monday's market correction sunk the stock. HOOD reported decent Q2 numbers last week that initially triggered an upbeat response, only for the stock to finish lower by the closing bell. However, investors quickly latched onto the positives from the quarter, pushing the stock marginally higher.

Briefing.com notes that even after a monster rally since intraday lows last week, shares of HOOD still trade around 25% below their two-year highs last month, reflecting an attractive upside in the event of a sustained rally. However, given HOOD's business model, there are factors potentially hindering its rebound capacity. For instance, since HOOD makes the bulk of its revenue via payment-for-order-flow (PFOF), markets must remain consistently healthy to keep traders actively engaged on the platform. Current price levels indicate some fear that markets could be nearing turbulence, pressuring HOOD's monthly active user (MAU) growth and its primary revenue stream. Changes in the regulatory environment could also pose a tall hurdle for HOOD.

Nevertheless, HOOD's steady quarterly performance last week illuminated solid progress in fortifying its competitive edge in a hotly contested industry.

• HOOD's active trading market share has been consistently expanding. To better compete with more established titans in the trading industry, including Charles Schwab (SCHW) and Interactive Brokers (IBKR), HOOD has been implementing changes to its trading platform to attract traders, such as introducing better margin rates, fueling an over 20% jump in margin balances. However, management conceded it has more work to do. Perhaps overhauling its mobile and web platform with more comprehensive charts could be a good place to start to carve out more of an economic moat.
• MAUs have increased for two consecutive quarters following several periods of declines, expanding by 9% yr/yr to 11.8 mln last quarter. While this did represent a sharp drop from the 13.7 mln in Q1, a decent sequential uptick in Gold subscribers helped ease the pain. HOOD's Gold membership, which costs a monthly fee, sets it apart from many brokerage platforms, offering compelling APY on uninvested cash and lower margin rates, among other features. Currently, just 8% of funded customers are Gold subs, underscoring how much potential recurring revenue HOOD can tap into by accelerating its Gold membership expansion efforts.
• International markets represent a massive opportunity for HOOD. The company has targeted the U.K. and surrounding European markets, where customers desire similar features in the U.S. As such, HOOD has focused on bolstering its international feature set, which could spark a long-lasting tailwind and further diversify its revenue.

HOOD embarked on a tremendous rally to start 2024, doubling its stock price at the peak last month only for the recent market correction to snap its uptrend. However, this pullback may merely be a temporary buying opportunity before the stock swells again as HOOD progresses into a go-to brokerage platform domestically and across Europe.