Financial services firm Robinhood Markets, Inc. (NASDAQ: HOOD) plans to launch a new fully-paid securities lending service, through which its users will be able to lend their stocks to other financial institutions, according to a report published by Bloomberg,
The company aims to compete with traditional brokerage firms like Charles Schwab (NYSE: SCHW), Morgan Stanley (NYSE: MS) and Fidelity Investments with the launch of this program, which is expected in the next few months. These companies already have a feature that allows their customers to lend their stocks.
Robinhood offers cryptocurrency trading, dividend reinvestment, fractional shares, recurring investments, and IPO Access through its cloud-based platform.
Stock Loan Income Program (SLIP)
Robinhood is currently working on the feature, Stock Loan Income Program (SLIP), in a beta version of its app for iPhones.
According to the company’s explanation of the feature on its app, “Through SLIP, you have the opportunity to earn passive income by lending whole shares of stocks to other institutions. These institutions may borrow stocks to settle trades or facilitate short sales. You’ll be able to buy and sell as usual, even if your stocks are on loan.”
“The feature won’t have Securities Investor Protection Corp. (SIPC) protection and won’t allow voting on proposals for companies. The shares will be secured by cash collateral we hold on your behalf,” the explanation read.
Meanwhile, a Robinhood representative said, “We are still on target to release this product in the first half of 2022, which will provide even more value to our customers.”
We, at TipRanks, believe the California-based company will stand to gain from this launch in the long-term as the SLIP will enable it to attract more customers.
Wall Street’s Take
HOOD stock closed 15.8% up on Wednesday. It gained another 0.5% during the extended trading session to end the day at $12.84.
Recently, Mizuho Securities analyst Dan Dolev maintained a Buy rating on the stock with a price target of $19 (48.7% upside potential).
Overall, the stock has a Hold consensus rating based on five Buys, five Holds and two Sells. The average HOOD price target of $19 implies 48.7% upside potential. Shares have lost nearly 70% over the past six months.
Website Traffic
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (NYSE: SEMR), the world’s biggest website usage monitoring service, offers insight into Robinhood’s performance.
According to the tool, compared to the previous year, Robinhood’s website traffic registered a 1.14% rise in global visits in February. However, website traffic has declined 68.8% year-to-date against the same period last year.
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