1 Stock Down 33% to Buy Hand Over Fist and Hold for 10 Years

It hasn't been a great year for Robinhood Markets (NASDAQ: HOOD). The financial services specialist has faced challenges that have sent its stock price sinking. Things got even worse when Robinhood announced its first-quarter financial results on April 28. The company's shares fell by more than 10% on the heels of its earnings release and are now down 33% year to date, as of this writing. Some might choose to stay away from Robinhood right now. However, for investors focused on the long game, it may be a good time to purchase the company's shares.

Image source: The Motley Fool.

Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »

Why Robinhood's prospects are still attractive

In the first quarter, Robinhood's revenue grew by 15% year over year to $1.07 billion. The company's earnings per share rose only 3% year over year to $0.38. Robinhood's results came up short of analyst expectations, a big no-no for a company trading at 37.5x forward earnings compared to the financial sector average of 14.8x. It's not surprising, then, that Robinhood's shares fell off a cliff. Of note, the company's cryptocurrency business was largely responsible for its poor financial results. Robinhood's cryptocurrency revenue of $134 million was down 47% year over year.

Robinhood's crypto business will remain a meaningful long-term risk. Although crypto has gained significant traction over the past decade, the industry remains highly volatile. It is also subject to significant and evolving regulatory scrutiny. That said, Robinhood has opportunities that could help it overcome this risk. First, the company's ecosystem continues to grow, with expanding platform assets and net deposits. Further, Robinhood is doing a better job of monetizing its ecosystem: During the first quarter, average revenue per user climbed 8% year over year to $157.

This is especially important given the company's growing subscriber base for its premium Gold service. Gold members tend to sign up for more products. As this membership service grows, Robinhood's monetization should improve. There are also growth avenues that could help Robinhood decrease its exposure to its cryptocurrency business. Consider the company's aggressive push into prediction markets. The good thing about this opportunity is that there is always something to bet on, whether it's the outcome of a political race, a sporting event, or a pop culture phenomenon.

Robinhood's strategy here could also run into regulatory issues. Still, if it can overcome that challenge, prediction markets could become an important source of sales: This has been one of the company's fastest-growing segments by revenue. Beyond that, Robinhood's core business and its entirely online model are popular, especially among younger investors, and could help it become the financial institution of the future as it continues to expand its services. The stock may be down massively this year, but for investors willing to stay the course through 2036, Robinhood might be an attractive pick right now.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.