Robinhood Shares Drop After Reporting Earnings That Failed To Meet Expectation

LONDON, UK – January 2021: Robinhood financial investing app on a mobile device

American financial services company Robinhood saw its shares drop on Tuesday after reporting its third-quarter earnings. The company’s revenue failed to beat the expectations of analysts and its shares fell 8 percent in after-hours trading.

The stock and cryptocurrency trading platform recorded total net revenue of $365 million and fell below the estimates of $431.5 million predicted by analysts. Although revenues increased 35 percent YoY, the figure recorded in the third quarter was far below the $565 million the company raked in as revenue for the second quarter. Although the revenue recorded in the second quarter was a result of the surge in cryptocurrency-related activities, revenue for the third quarter wasn’t expected to drop too low.

Transaction-based third quarter revenue stood at $267 million out of which cryptocurrency accounts for $51 million. The company recorded $233 million in the second quarter for revenue from crypto trading which was boosted by the Shiba Inu dog-based coin – Dogecoin. Speaking about the last quarter and the company’s stand on cryptocurrency, the company’s CFO Jason Warnick said that “Q2 was kind of one of those idiosyncratic market events where there’s this massive interest specifically in doge. We love it when those moments happen. It’s a great way to bring a lot of new customers onto the platform. But we’re really thinking about investing in crypto over the long term. And so it’s you know, frankly, it’s gonna be impossible for us to accurately predict revenue on a quarter-to-quarter basis.”

The company’s net cumulative accounts fell to 22.4 million in the third quarter from 22.5 million in the second quarter. Its monthly active users fell to a total of 18.9 million, down from the second quarter’s record of 21.3 million. Also, the average revenue per user fell by 36 percent to $65 YoY from $102.

While analysts expected the company to suffer a net loss of $1.37 per share, according to Refinitiv, Robinhood reported a net loss of $1.32 billion or $2.06 per share, and share-based compensation expense ran into a total of $1.24 billion in the third quarter. Vlad Tenev, CEO and co-founder of Robinhood Markets mentioned that “this quarter was about developing more products and services for our customers, including crypto wallets. More than one million people have joined our crypto wallets waitlist to date”.

While equities trading added $50 million to transaction-based revenue, options trading contributed $164 million.

The company says it expects fourth-quarter revenue of about $325 million. “For the three months ending December 31, 2021, we anticipate that many of the factors that impacted our third-quarter results, such as seasonal headwinds and lower retail trading activity, may persist”, a press release from the company said.

The company’s stock closed at $39.57 per share on Tuesday.

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