Unstoppable Stocks That Could Join Nvidia, Amazon, Meta Platforms, and Alphabet in the Trillion Dollar Club in 20 Years

One way to get great long-term returns is to invest in one of the $1 trillion+ companies, such as Nvidia, Platform meta, Amazon, Alphabetand several others. Almost every single member of this highly exclusive club looks set to do relatively well over the next decade and beyond.

Another way is to buy shares of companies that are still far from the $1 trillion market cap but have the potential to get there. That describes it from my point of view Robinhood Markets (HOOD 2.83%)fintech company.

This popular online trading platform is firing on all cylinders. With a market cap of $112 billion, it needs a compound annual growth rate (CAGR) of at least 11.6% to become a trillion-dollar company within 20 years. It’s no easy task, but here’s why Robinhood can do it.

Converting Wall Street to Main Street

The financial industry has developed considerably. Access to various services, including stock trading, is easier and cheaper. Some of the changes that make this possible include fee-free trading on easy-to-download and highly interactive mobile apps, access to fractional shares that allow investors to buy shares at almost any price, no minimum balance requirements on core accounts, and more.

Robinhood helped pioneer the commission-free trading model and offers all these other benefits. It was built with the idea that certain services should not only be available to the rich and well-connected – hence the company’s name.

This isn’t just a fun story. It goes to the heart of what has been the driving force behind Robinhood’s success in recent years. The company’s platform is especially popular among younger investors for at least two reasons.

First, compared to older generations, they prefer to access all kinds of services through mobile apps. Second, millennials have a complicated relationship with traditional financial institutions, with many of them coming of age during the financial crisis of 2008. That popularity with younger people has helped boost the company’s financial results — and stock price — over the past two years.

HOOD Sales data (quarterly) by YCharts

Beyond the revenue and earnings numbers, Robinhood’s business has expanded considerably. It ended the second quarter with total platform assets of $279 billion, nearly double the year-ago period. The company’s funded customers (which are roughly active account holders) grew 10% year-on-year to 26.5 million, while subscribers to its premium Gold service reached 3.5 million, up 76% from a year ago.

Today’s Change

(-2.83%$-3.85

Current price

$131.95

Key data points

Market capitalization

117 billion dollars

Daily range

$131.36 -$135.25

Range 52 weeks

$23:00 -$153.86

Volume

4K

Avg. flight

40 million

Gross margin

88.35%

Dividend yield

ON

Financial institutions of the future

Robinhood became famous for its attractive stock trading feature. Although the company has been criticized for its role in the meme stock phenomenon and making risky trades accessible to newbies, its recent run vindicates its business model.

However, we are probably still in the early innings of Robinhood’s growth story. The benefits that made the company popular with millennials won’t go away. Robinhood has also significantly expanded its offering and now competes with traditional financial institutions in many categories, all on the same user-friendly app that made it popular. Millennials are just entering their prime earning years (mid-40s to mid-50s).

Meanwhile, Gen Z and Gen Alpha are still far from it. Over the next 20 years, everyone will get richer and increase spending on all the services Robinhood offers, giving the company significant long-term growth opportunities.

It’s true that other banks have adapted to the modern model that Robinhood helped pioneer. Still, the company has (or is in the process of building) important competitive advantages.

First, it has built a brand synonymous with commission-free trading, making it one of the first options new investors are likely to turn to. Brand power counts for something.

Second, as Robinhood’s ecosystem deepens and people invest more in different plans — including things like retirement accounts — the company will develop high switching costs, meaning customers won’t be reluctant to switch to a competitor.

Bears will argue that Robinhood stock looks too expensive. The company trades at a staggering 71 times forward earnings, which is high by almost any standard, especially compared to the 16.3 average for financial stocks.

These caveats are reasonable, but in my opinion the stock is very attractive. Robinhood is helping to change financial institutions and the way we interact with them, and it could cash in on that over the next two decades, which is (more than) long enough for the company to grow in its valuation. Robinhood appears well-positioned to generate the CAGR it needs by 2045 to become a trillion-dollar stock.