You wouldn't believe how this beaten-down growth stock is making money.

Many businesses have benefited from favorable market conditions. Take a look. Robinhood Markets (NASDAQ resonance code: HOOD)as soon as Got it! The company's stock price has risen more than 40% so far this year. As of Friday, the company's stock price had risen more than 40% so far this year.

But look at the bigger picture and it's a completely different story. The fintech stock is currently trading about 70% below its all-time high, and it's clear that Robinhood's market capitalization still has a lot of work to do before it reaches its highest point.

Maybe they'll go after this one, the one that's being suppressed. Growth StocksThe following is a list of all the products and services that will be offered by the company. As a way to ride the wave(used form a nominal expression)investor You'll want to know more about Robinhood's business model. You may be surprised to learn how the company earns a significant amount of revenue.

Thank you, Fed.

Most people know Robinhood as a low-cost online brokerage service. Its 10.9 million monthly active users (MAUs) use the platform to trade stocks, options, and cryptocurrencies, providing it with transaction-based revenue. This was the source of its $42% in revenue last year.

You may be wondering what else Robinhood can do to make money. All eyes are on net interest income, which totaled $929 million in 2023, or half of the company's total revenue, an increase of $1,19% from 2022, and only $14% of Robinhood's total revenue in 2021, when the fed funds benchmark rate was still near zero.

The interest comes from cash on the company's balance sheet, funds in customer accounts, and customer credit card balances. At a time of high interest rates, Robinhood was able to reap a nice windfall by doing nothing. Without this important source of revenue, the company's net income would not have been positive in the second or fourth quarter of last year.

firmsMr. Koon's team should be thanked. US Federal Reserve (Fed), the US central bankAs part of its efforts to curb soaring inflation, the Fed has been aggressively raising interest rates since March 2022 As part of its efforts to curb soaring inflation, the Fed has been aggressively raising interest rates since March 2022, which has benefited Robinhood. This has benefited Robinhood.

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The recent growth in interest income worries me. This is not Robinhood's core business - the company's primary business is to facilitate market trading for its users. Investors need to recognize that this kind of revenue growth is not sustainable.

However, it is fair to say that inflation is proving to be a bit more severe than expected. While inflation is well below its peak above 9% in mid-2022, it still stood at 3.5% in March, and the Fed is looking to bring it down to around 2%. As a result, the central bank is Start cutting interest ratesYou may need to wait before (math.) genusAnd analysts and economists are waiting with anticipation for this action. But if history is any indication, rates are likely to come down sometime in the future. We just don't know when. The U.S. government has an outstanding debt of $35 trillion and a deficit of $1.7 trillion last fiscal year, both of which make lower interest rates highly desirable.

This means that the economic conditions that have given Robinhood's finances such a boost are finally coming to an end. This is troubling because it points to a more fundamental problem: the company's success has been strongly influenced by factors beyond its control. Neither the bank nor the Goldman Sachs team has any say in what happens to interest rates. This adds uncertainty to Robinhood's operations and financial position.

In addition, the business is fully exposed to the unpredictable performance of various assets. Theoretically, rising asset prices increase people's interest in investing, and Robinhood provides excellent user feedback in this regard, so during a bull market it should be able to register more clients, who will also trade more frequently.

Worryingly, however, in the midst of a bull market in 2023, Robinhood has seen a 4% annual decline in trading revenue. Moreover, as of the end of 2023, the company's MAU base is smaller than it was 12 months ago.

These worrying indicators should make you think twice about buying stocks.

Should you invest $1,000 in Robinhood Markets right now?

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You Won't Believe How This Suppressed Growth Stock Is Making Money was originally published by The Motley Fool.