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Robinhood stock took a heavy beating following a massive reduction in the number of active users investing on the platform.
Multi-faceted financial services platform Robinhood Markets Inc (NASDAQ: HOOD) saw its stock plunge by 15% in after-hours trading. This came about after the platform reported its first-quarter revenue on Thursday, January 27th, missing Wall Street projections.
Robinhood announced that its anticipation for first-quarter revenue is less than $340 million, 35% lower than its revenue for the same period last year.
Meanwhile, the consensus estimate of Wall Street for Robinhood’s Q1 2022 was $448.2 million. Furthermore, the number of active users on the platform also fell from 18.9 million in the third quarter to 17.3 million last quarter. This convincingly posits as a contributing factor to Robinhood’s subpar earnings performance as average revenue per user decreased to $64 YoY from $106.
Before Thursday’s quarterly results, Robinhood stock was changing hands at less than $12 per share. This is a far cry from the record intraday high of $85 per share back in August 2021. Since that period, Robinhood stock has been on a gradual downward trajectory, especially after crypto revenue tumbled 78% from the prior three-month period. This also resulted in a slowdown in trading on the Robinhood app.
Robinhood’s Q4 Run Through
Robinhood’s revenue was $362.7 million for the fourth quarter, lower analysts’ expectations of $370.92 million. Its crypto revenue stood at $48 million, which fell some way off the $55 million that Wall Street projected. Furthermore, the dynamic trading app also sustained a loss per share of 49 cents more than the general consensus forecast of 42 cents. Meanwhile, Robinhood’s net cumulative funded accounts stood at 22.7 million at the end of the fourth quarter, matching estimates. In addition, this figure also represents a slight increase from the 22.4 million accounts recorded in the preceding quarter. In 2021 alone, Robinhood onboarded 10 million accounts.
Robinhood’s market capitalization is currently less than 10 billion, and its shares are down more than 34% in January alone. In addition to this, the trading app’s stock is now also more than 86% down from its last recent high since it went public.
Hugh Tallents, senior partner at management consultancy cg42 touched on this situation in a media session. According to him, “Robinhood had all of the tailwinds that you could want running up to their IPO. The problem that they’ve had is that all of those basically have unwound in the last eight to 10 months. They had five years of business plan success baked into that IPO price. Now you’re starting to see it valued more like a ‘fin’ than a ‘tech,’ and that multiple isn’t attractive necessarily.”
Despite Stock Headwind, Robinhood Reaffirmed Commitment to Fostering Long-term Investments
Robinhood asserted that it looks to continue building products designed to support long-term investing. The company also said that it is exploring products in spending and savings, such as instant debit card deposits and withdrawals. Robinhood’s assets under custody surged to $98 billion on an annualized basis.