In this photo illustration, the Robinhood application is viewed on an iPhone on December 17, 2020 in San Anselmo, California.
Justin Sullivan | Getty Images
Retail investors don't seem to be punishing Robinhood too badly for last week's GameStop controversy, as the retail app remains the go-to place for trading stocks.
Robinhood was by far the leader in app downloads last week, according to JMP Securities' analysis using SimilarWeb's app data. The free stock trading pioneer let more than 600,000 people download its app on Friday, compared to 140,000 on its best day in March during the market crisis caused by the Covid pandemic last year.
Robinhood had more than 3 million app downloads in January, the highest recorded figure, data showed. Coinbase had 1.3 million and Webull in China had more than 800,000 downloads last month.
"Robinhood actually added a tremendous number of new accounts, both of which made it into the past week, but also saw record growth on some of the toughest operating days of the past week," Devin Ryan, analyst at JMP Securities, told clients.
A move by retail investors last week put pressure on hedge funds that are heavily reliant on stocks like GameStop and AMC Entertainment. The action, according to Goldman Sachs, increased GameStop's shares by 500% in the largest short squeeze in 25 years, forcing several hedge funds to close their short positions. The rampant volatility weighed on even the major averages, which had their worst weekly sell-off since October.
The increased capital requirements from record trading activity forced Robinhood and other brokers to restrict trading in stocks and options on Thursday, relieving the controversial names somewhat. The Depository Trust & Clearing Corp. clearinghouse requirements rose a staggering $ 7.5 billion to $ 33.5 billion, forcing Robinhood to raise funds for investors and develop credit lines overnight on Thursday.
Robinhood restricted purchases of a handful of shares and in some cases only allowed customers to buy one share of GameStop. The company also increased the margin requirements on certain stocks and options.
However, the restrictions were received with anger by customers who felt they were tied to a company that relied on a mission to democratize investment. Frustrated customers took to Twitter denouncing Robinhood with many threats to leave the app.
While some customers left the app for other stock trading platforms like Square & # 39; s Cash App, Webull and Sofi, Robinhood continued to be the app of choice for retail investors.
According to SimilarWeb data, E-Trade's app was downloaded nearly 220,000 times in the last month. TD Ameritrade had nearly 370,000 downloads and Charles Schwab had more than 75,000 downloads. Fidelity's app has been downloaded 340,000 times and Sofi had more than 121,000 downloads last month.
Can Robinhood handle the wave of new customers?
Robinhood still limits trading in certain stocks on Monday. Customers can only buy one share of GameStop stock and five options contracts. However, the millennial-favored stock trading app has reduced its list of restricted stocks from 50 on Friday to eight as of Monday.
Amid a surge in new customers, JMP said upgrading infrastructure must be Robinhood's first step in keeping the new investors.
The company expects Robinhood to increase its capital, technology resources, and people in order for the app to provide full access to its customers.
However, the possible events of the past week have put some customers off for good. According to JMP, mobile-first companies like Webull and SoFi benefit from the Robinhood drama, as do established companies in the industry like Charles Schwab and TD Ameritrade.
Square's Cash app emerged as the winner, according to a survey by Mizuho Securities.
"We also expect the strong competitive reaction to continue in the face of confusion and finger pointing," said Ryan. "We believe this could lead to some account movement. The sooner companies like Robinhood get back to business, the less attrition we would expect."
Subscribe to CNBC PRO for exclusive insights and analysis as well as live business day programs from around the world.
– With reports from CNBC's Nate Rattner.