By Michael Dabaie
Robinhood Markets Inc. shares fell in Wednesday trading after quarterly revenue missed analyst views.
Shares were down 9% at $35.96 in late morning trading, putting them below the company's initial public offering price of $38 from this summer.
The financial services platform company reported after the bell Tuesday reported third-quarter total net revenue of $365 million, up on year but missing FactSet consensus for $437.1 million. Transaction-based revenue of $267 million was below the $325.3 million FactSet consensus.
Options increased 29% to $164 million, above FactSet consensus of $154.6 million. Cryptocurrencies increased 860% to $51 million, but came in below FactSet consensus for $125.7 million. Crypto activity declined from record highs in the prior quarter, leading to considerably fewer new funded accounts, the company said.
Equities decreased 27% to $50 million and missed FactSet consensus of $59.2 million.
Net loss was $2.06 per share. Adjusted earnings before interest, taxes, depreciation and amortization was negative $84 million, compared with positive $59 million in the third quarter of 2020.
"With top-line results significantly below expectations (ours as well as consensus), lower [monthly active users], declining [average revenue per user], very negative adjusted Ebitda...and disappointing 4Q guidance including no uptick in new funded accounts, we believe 3Q may be poorly received and we expect a negative stock reaction," Mizuho Securities USA said in a note.
Although results were lackluster, there were a few positives, including progress on crypto wallet, with a million wait list sign-ups and a more normalized equities/crypto revenue mix, Mizuho said.
"We have highlighted that we estimate Robinhood has a higher market penetration leaving less room for growth, a hypothesis supported by the 3Q results," J.P. Morgan said in an analyst note.
"The core of Robinhood's earnings is trading revenues, which fell more than expected," J.P. Morgan said, pointing to equity trading as particularly weak.
"We believe Robinhood has been overearning and guidance will weaken for '22," said J.P. Morgan, which rates the stock at Underweight. JPM lowered its price target to $26 from $35.
KeyBanc Capital Markets, which rates shares at Overweight, lowered its estimates and price target, but said it remained constructive on several catalysts that could boost strategic perception, including Cash Management scaling, yield enhancements, the Crypto wallet launch and automatic account transfers-in.
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(END) Dow Jones Newswires