Disappointing Earnings Report Hurt Robinhood Stock, Fell More Than 10% During Pre-Trading Hours

Shares of Robinhood

Robinhood Markets, Inc. $HOOD: $35.44(-10.44%) , on Wednesday, fell more than 10 percent after the newly listed stock brokerage firm posted a worrisome earnings report, missing Wall Street analyst expectations. Its revenue figures could not match the market forecast, as crypto activity came off record highs, leading to fewer new funded accounts and lower revenue as expected.

Total net revenue for the July- September quarter came in at $365 million, failing to reach even close to the Refinitiv estimate of $431.5 million.

Revenues saw a rise of 35% year over year but lagged far behind its second quarter’s revenue of $565 million led by a surge in crypto trading.

Transaction-based revenues saw an increase of 32% to $267 million year-over-year, with $51 million coming from cryptocurrencies and $164 million from Options. Equities revenue decreased by 27% to $50 million, corresponding to 69 million in the third quarter of 2020.

Average Revenues Per User (ARPU) decreased by 36% to $65, compared with $102 reported during the same quarter, last year.

Net Cumulative Funded Accounts fell 0.44% to 22.4 million from 22.5 million in the second quarter, but saw a spike of 97% to 22.4 million, compared with 11.4 million in the prior-year period.

“Looking back at Q2, we saw huge interest in crypto, especially Doge, leading to large numbers of new customers joining the platform and record revenues. In Q3 crypto activity came off record highs, leading to fewer new funded accounts and lower revenue as expected, said Vlad Tenev, Chief Executive Officer and Co-Founder in the earnings conference call.

Following the declaration, shares of the newly public company slid 8% in after-hours trading on Tuesday. The disappointing earnings report card stirred discussion among users of Twitter and Reddit, which was reflected on the dashboard of Quantale as stock activity surged more than 300 percent.

Post the release of the earnings, the stock– Robinhood made it to the top in Stock Market News in the USA.

Robinhood stock opened at $39.61 on Wednesday, down $0.6 apiece, compared to the previous session close of $39.01 on the NASDAQ. In the initial hours of trading, shares of the stock were exchanging hands at $35.93, down 9.20%.

Disappointing Earnings Report Hurt Robinhood Stock, Fell More Than 10% During Pre-Trading Hours

The firm reported a loss before income tax of $1.37 billion, compared with a loss before income tax of $11 million in the prior-year period.

Share-based compensation expenses totaled $1.24 billion in the reporting quarter, of which $1.01 billion was recognized upon IPO. The firm went public on the Nasdaq on July 28th with an IPO price of $38/share.

Robinhood reported a net loss of $1.32 billion, or $2.06 per share. However, Wall Street expected it to be $1.37 per share, according to Refinitiv.

Adjusted EBITDA was negative $84 million against the positive $59 million reported in the third quarter of 2020.

“This quarter was about developing more products and services for our customers, including crypto wallets,” said Vlad Tenev, CEO and co-founder of Robinhood Markets. “More than one million people have joined our crypto wallets waitlist to date.”

For its fourth quarter, Robinhood sees its revenue coming in at no greater than $325 million. The company expects its full-year revenue to post not less than $1.8 billion.

“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. In the absence of any changes to the market environment or exogenous events, we believe this may result in quarterly revenues no greater than $325 million and full-year revenue of less than $1.8 billion. Additionally, we expect new funded accounts for the fourth quarter will be roughly in line with the 660,000 opened in the third quarter of 2021,” said the company in a statement.