Robinhood or Schwab: Which Brokerage Stock Is the Better Buy Now?

As the investing landscape evolves at breakneck speed, two online brokerages, Robinhood Markets HOOD and Charles Schwab SCHW, stand at the forefront of a financial transformation, offering retail investors access to stock and ETF trading. Further, both are competing for market share in the digital investing and wealth management space. While HOOD has redefined trading with its sleek, mobile-first platform and growing presence in crypto and fintech innovation, SCHW remains a powerhouse in wealth management, offering a full-service ecosystem trusted by millions of long-term investors. Let’s find out which brokerage stock offers more upside amid technology, regulation and investor behavior shift in 2025.The Case for RobinhoodRobinhood has come a long way from riding on the meme stock wave and becoming immensely popular among younger generations in early 2021 to joining the S&P 500 index last month. The company has evolved from a brokerage firm primarily trading in digital assets to a more mature and diversified entity, striving to become a one-stop shop for building generational wealth and expanding globally. It plans to serve both casual/novice investors and more active/sophisticated traders. Robinhood recently expanded its offerings with managed portfolios (Robinhood Strategies), AI-powered trading tools (Cortex), advanced trading via Legend, and new banking services for Gold members. Features like Legend, futures, short selling, custom scans, and social trading all appeal to more advanced traders, while banking and robo/managed portfolios help bring along the mainstream.HOOD also introduced short selling, multiple accounts, prediction markets and tokenized stocks in Europe, marking a shift toward a full-service financial super-app. These are not only drawing new investors but also helping the company create more non-transaction or recurring fee-based revenues, beyond pure commission-style or spread/trading fee revenues. Also, Robinhood is expanding aggressively through acquisitions. Recent deals include Bitstamp for crypto, WonderFi for Canadian digital assets, TradePMR for Registered Investment Advisors services and Pluto Capital for artificial intelligence (AI)-driven investing. These moves support its goal of becoming a global, full-spectrum financial services provider, with ambitions to expand into the Asia-Pacific region.The Case for SchwabWith almost $11 trillion in total client assets and a dominant position in both retail brokerage and advisor custody, Schwab benefits from deep client relationships and recurring revenue streams. Its acquisition of TD Ameritrade (“TDA”) in 2020 solidified its leadership among retail and institutional investors.A key strength of Schwab is its diversified revenue base, which includes net interest income (NII), asset management fees and advisory services. Rising interest rates over the past two years have significantly boosted the company’s net interest margin (NIM). Also, its focus on repaying high-cost bank supplemental funding balances will drive NIM. By the end of June 2025, the bank's supplemental funding balance was down 70% to $27.7 billion from a peak of $97.1 billion recorded in May 2023. Schwab’s RIA custody business is one of the largest in the United States, and demand for independent advisors continues to grow. The integration of TDA enhanced the company’s ability to scale and serve this high-margin segment.Schwab is modernizing its platform to appeal to younger investors, with improved digital tools and plans to launch spot Bitcoin and Ethereum trading by mid-2026. This move aligns with changing investor behavior, as clients seek diversification. The company’s scale and trusted platform position it well to serve as a bridge between traditional finance and digital assets, especially as cryptocurrency adoption becomes increasingly mainstream.How Do Earnings Estimates Compare for HOOD & SCHW?Over the past seven days, the Zacks Consensus Estimate for HOOD’s 2025 and 2026 earnings has remained unchanged, implying growth of 58.7% and 15.3%, respectively.Earnings Estimates for HOOD Image Source: Zacks Investment ResearchAnalysts are more bullish on Schwab’s prospects. The earnings estimates for 2025 have been revised north over the past week, while that for 2026 has remained unchanged. The consensus mark for SCHW’s 2025 and 2026 earnings suggests 43.1% and 16.1% growth, respectively. Earnings Estimates for SCHW Image Source: Zacks Investment ResearchHOOD & SCHW: Price Performance, Valuation & Other ComparisonsYear to date, shares of Robinhood have performed extremely well, given the bullish investor sentiments on the back of solid expansion efforts. The stock has soared 309.2%, while Schwab has gained 27%. In terms of investor sentiments, HOOD has the edge. Image Source: Zacks Investment ResearchValuation-wise, HOOD is currently trading at the 12-month trailing price-to-tangible book (P/TB) of 18.49X. The SCHW stock, on the other hand, is currently trading at the 12-month trailing P/TB of 7.37X.  Image Source: Zacks Investment ResearchThus, Schwab is trading at a discount compared with HOOD. Schwab’s return on equity (ROE) of 19.3% is higher than HOOD’s 17.48%. This reflects SCHW’s efficient use of shareholder funds in generating profits. Image Source: Zacks Investment ResearchHOOD or SCHW: Which Stock to Buy on Evolving Investing Trends?Robinhood and Schwab are carving distinct paths in reshaping the future of finance. While HOOD is leaning into innovation, crypto expansion and aggressive growth, SCHW leverages its massive asset base, stable earnings and trusted platform without compromising its conservative approach. SCHW’s rising earnings estimates, an inexpensive valuation and solid ROE offer a compelling blend of reliability and growth potential in an evolving financial landscape. On the other hand, HOOD may appeal to growth-focused investors energized by its rapid transformation and recent stock surge. Further, Schwab faces risks from interest rate cuts, which could significantly reduce its NIM due to a larger reliance on interest spreads. Rising competition from fintechs, including HOOD, with their mobile-first and crypto-focused platforms, may limit the company’s appeal among Gen Z and millennial investors despite its recent digital moves. Hence, Robinhood stock stands out as a compelling investment amid changing trends. Currently, HOOD sports a Zacks Rank #1 (Strong Buy), while Schwab has a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks' Research Chief Picks Stock Most Likely to "At Least Double"Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.See Our Top Stock to Double (Plus 4 Runners Up) >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Charles Schwab Corporation (SCHW): Free Stock Analysis Report Robinhood Markets, Inc. (HOOD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks