Robinhood's $179 million WonderFi deal could boost revenue by 10%, analyst says

Robinhood made a splash earlier this week with its purchase of crypto trading platform WonderFi Technologies, which owns two of Canada's longest-standing regulated crypto platforms, Bitbuy and Coinsquare. The all-cash deal is valued at C$250 million, or around $179 million in U.S. dollars.

The commission-free brokerage's acquisition is a "critical first step" in entering the Canadian market, Mizuho Securities analyst Dan Dolev wrote in a Wednesday note. His team sees a long-term revenue opportunity of around $250 million per year for Robinhood.

"HOOD is already going global. Its UK/EU rollout is gaining steam, and its Asia launch - which is set for later this year - should be a major catalyst," Dolev wrote in the March 17 note. "We apply a similar rationale to help estimate potential upside to HOOD users and revenue from the potential entrance into the Canadian fintech market."

As of mid-2024, Canada had a population of 41 million, and of this, about 66% (or 27 million) were aged 15-64, which is Robinhood's approximate target age cohort, according to Dovev.

"We conservatively assume that, over the medium-term, HOOD can penetrate its Canadian user TAM at 75% of the rate at which it has penetrated its US TAM to date," the analyst wrote in the note. "This implies ~3mn Canadian HOOD Funded Accounts (e.g. 17% US penetration x 25% haircut x 27mn population of target age cohort = ~3mn people), or ~13% upside to its current user base."

Heading into the fourth quarter of 2024, Dolev noted Robinhood's revenue per funded account was about $100 per year.

"Assuming a 25% haircut for conservatism implies revenue per Canadian funded account of $75 per year," he wrote. "This implies ~ $250mn of annual revenue from Canadian funded accounts, or nearly 10% upside to 2024 levels."

The commission-free brokerage generated $141 billion in crypto trading volumes throughout 2024. Crypto trading volume rose 28% year-over-year to $46 billion in the first quarter of this year. In 2024, WonderFi generated crypto trading volume of C$3.6 billion ($2.5 billion USD), and its assets under custody totaled about C$2.1 billion.

Last year, Robinhood agreed to acquire the European crypto exchange Bitstamp for $200 million. The company is also planning to launch a blockchain-based platform that would allow users in Europe to trade U.S. securities, Bloomberg reported earlier this month.

Meanwhile, Mark Carney's snap election victory to become Canadian prime minister leaves the crypto industry's future uncertain, The Block's Daniel Kuhn reported last month.

Mizuho maintains an "outperform" rating and $65 price target on HOOD shares. Robinhood's stock trades around $61.79 at publication time, according to The Block's HOOD price data.