Robinhood Markets (HOOD) late Wednesday crushed earnings estimates for a first quarter that saw a surge in retail cryptocurrency trading. Robinhood turned lower Thursday.
The Robinhood earnings report came after the online broker on Monday disclosed it had received a "Wells Notice" over crypto trading on its trading platform.
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Robinhood Earnings
Estimates: Analysts, on average, expected Robinhood earnings of 6 cents per share vs. a loss of 57 cents a year ago. Revenue was seen rebounding 25%, year over year, to $552.7 million, according to FactSet.
Results: Robinhood reported earnings of 18 cents a share. Revenue surged 40%, year over year, to a record $618 million.
Trading revenues increased 59% to $329 million, the company said. That included cryptocurrencies revenue of $126 million, up 232%; options revenue of $154 million, up 16%; and equities revenue of $39 million, up 44%.
Net interest revenues increased 22% year-over-year to $254 million. "Growth in interest-earning assets and higher short term interest rates" drove the gain, the company said.
Outlook: Analysts expect the first annual profit in 2024, of 30 cents per share. Robinhood, the upstart online brokerage which made its public debut in 2021, has an inconsistent history of quarterly profits.
Robinhood Stock
Shares of the zero-commission trading app edged down 0.5% to 17.76 on the stock market today, testing support at the 50-day line. Robinhood stock popped as much as 9.1% intraday before paring gains.
Robinhood stock is on track to have a base with a 20.55 buy point, the MarketSmith pattern recognition shows. A decisive move above the 50-day moving average would have offered an early entry in an emerging consolidation, using Monday's high of 18.46 as specific trigger.
The relative strength line for Robinhood stock has drifted lower since end of March. The RS line, the blue line in the chart above, shows how a stock is performing vs. the S&P 500.
Among other online brokers, Charles Schwab (SCHW) and Interactive Brokers (IBKR) also lost a fraction Thursday. But E-Trade owner Morgan Stanley (MS) rose.
Robinhood Wells Notice
On Monday, Robinhood disclosed it had received an enforcement action notice from the SEC related to crypto trading on its retail platform.
A so-called Wells notice informs a recipient that they were involved in an investigation that has concluded. Named after the 1972 Wells Committee, a group formed to advise the SEC on its enforcement practices, aWells notice typically indicates some sort of infraction, which could be followed by enforcement action.
At the heart of the Robinhood dispute is whether cryptocurrencies are securities are not. Robinhood argues crypto assets listed on its platform are not securities. The SEC argues most cryptocurrency tokens are securities and fall under its registration rules.
The price of bitcoin can be a driver for Robinhood stock, with cryptocurrency moves key for the brokerage's crypto trading. Bitcoin fell modestly Wednesday around $62,000, pulling back from record highs in March.
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Year to date, Robinhood stock has shot up 41%. Shares have nearly doubled in the past year, up 97.5%, but remain far below their post-IPO high, set in August 2021.
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