Shares of Robinhood Markets (HOOD) sank over 14% in early trading Wednesday after the online brokerage reported worse-than-expected results as trading activity and users declined.
Robinhood posted a third quarter fiscal 2023 loss of $0.09 per share. Revenue increased 29% from a year ago to $467 million, primarily because of a jump in interest income fueled by Fed monetary tightening. Both were short of estimates.
The company’s transaction-based sales fell 11% to $185 million. Trading revenue for equities dipped 13% to $27 million, and it plunged 55% to $23 million for cryptocurrencies. Options trading revenue was unchanged at $124 million. The number of monthly active users (MAU) dropped 16% to 10.3 million.
Net interest revenue soared 96% to $251 million. However, CFO Jason Warnick warned that if current levels of securities lending and free credit balances continue, Robinhood expects current quarter interest revenue to be about $20 million lower than that.
Robinhood’s commission-free platform was at the center of the “meme stock” craze of early 2021, when retail traders connected through social media and drove up the price of stocks that had been beaten down by short sellers. Robinhood went public later that year and shortly after shares hit a record high. Less than a year later, they fell to an all-time low, and have traded in a tight range ever since. Despite Wednesday’s losses, they remained in positive territory for the year.
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Shares of Robinhood Markets (HOOD) sank over 14% in early trading Wednesday after the online brokerage reported worse-than-expected results as trading activity and users declined. Robinhood posted a third quarter fiscal 2023 loss of $0.09 per share.
Shares of Robinhood Markets edged lower after the company disclosed that it received a notice from the Securities and Exchange Commission staff recommending that the regulator file an enforcement action against its cryptocurrency unit.
Limited research: Research tools and information at Robinhood don't measure up to competitor standards, making it difficult for traders to get the most out of the platform. There are no stock or ETF screeners available at all, and other research tools are rudimentary at best.
On Tuesday, it said monthly active users fell 16% from the same time last year, to 10.3 million. Wall Street expected 10.7 monthly active users at the end of the third quarter. “It's been nearly 10 years since we founded Robinhood and we're just getting started,” said CEO and co-founder Vlad Tenev, in a statement.
For instance, Robinhood is a very sleek and minimal application, and investor tools are rudimentary compared with those of other major brokerages like Charles Schwab and E*Trade. This can lead to hasty and uninformed decision-making, especially for novice investors.
Today, though, Robinhood is still standing. In a new Wall Street Journal profile, Tenev says the company is done with distractions and is focused again on building for the long term. This includes retirement accounts and a credit card business, which will make it less dependent on the highly volatile trading markets.
through an elaborate scheme in which they boosted the prices of highly illiquid stocks using money they took from the platform. Over the course of four years, prosecutors say, the four men orchestrated hundreds of thefts of $5,000 at a time from Robinhood through a scheme known as “free riding.”
Robinhood Financial LLC and Robinhood Securities, LLC are both members of SIPC, which protects securities for customers of its members up to $500,000 (including $250,000 for claims for cash) for each investing account, including IRAs.
Key Takeaways. Robinhood shares tumbled as the online brokerage missed analysts' estimates and warned about current quarter revenue. The company reported a bigger loss and lower sales than expected as trading slowed and users declined.
The problem is, according to users of the trading app, Robinhood isn't allowing them to sell their contracts or get paid. A slew of the contracts are set to expire on Friday. That's got some of them miffed.
In the unlikely event that Robinhood goes bankrupt and couldn't return the shares to you, this third party bank would pay you the value of your loaned securities in cash. The risk is mitigated by the collateral held separately, elsewhere.
Insurance – Robinhood sweeps cash balances into F.D.I.C.insured banks each day. This means that cash balances at Robinhood are insured up to $250,000 per user. In addition, all stocks and ETFs in the platform are insured up to $500,000 through the Security Investors Protection Corporation (SIPC).
Fees. If you're charged a fee and you don't have enough brokerage cash in your account to cover it, you may have an account deficit. Some of the most common fees that cause customers to have an account deficit are Robinhood Gold fees and fees associated with American Depositary Receipts (ADRs).
PDT Rule. The PDT rule is a regulatory guideline set by the Financial Industry Regulatory Authority (FINRA) to discourage excessive trading. While it limits those with less than $25,000 to fewer than four day trades in a rolling five-business-day period, it's not an outright barrier.
Robinhood is best for active traders who place commission-free trades in stocks, options, ETFs, and cryptocurrencies. The brokerage account has no minimum size requirements for most of its investments, but you'll have to make minimum opening deposits for its fractional shares and margin trading offerings.
In 2024, analysts expect Robinhood to finally turn profitable on a GAAP basis as it more than doubles its adjusted EBITDA to $1.08 billion. Based on those expectations, Robinhood trades at 25 times this year's earnings and 32 times its adjusted EBITDA.
Zacks' proprietary data indicates that Robinhood Markets, Inc. is currently rated as a Zacks Rank 2 and we are expecting an above average return from the HOOD shares relative to the market in the next few months.
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