Robinhood Markets (HOOD) stock surges after the trading platform reported its fourth quarter earnings beat. Whalen Global Advisors chairman Chris Whalen joins Morning Brief with Brad Smith and Madison Mills to discuss how the company can compete with the big financial services players.
Whalen tells Yahoo Finance that Robinhood "was one of the best-performing non-bank stocks" that he follows, but the company has "been paying a lot of money for the growth." He explains that the brokerage has been offering incentives, like IRA matches, to customers.
The analyst notes, "The question in my mind is: When we get this business to a size where we can kind of pull back a little bit on the incentives and the spend, what does it look like going forward? Can they really go out and compete with the Schwabs (SCHW) and the Ameriprises (AMP), who are hyper-efficient?"
"Over time, they’re going to have to become a bank if they want to compete with Charles Schwab. It’s just the way it is. This is a vicious business … and once they really become large enough to be a threat to some of these firms, you’re going to see the competitive environment heat up a lot," Whalen adds.
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