Shares of retail brokerage Robinhood fell more than 12% in after-hours trading due to a lack of earnings targets in the last quarter of 2021 as a boom in memes and cryptocurrency retail they lost strength.
Robinhood said it expects revenue to fall 35 percent in the current quarter to less than $ 340 million compared to the first quarter of 2021, the peak madness of meme stock trading.
The brokerage company, which has become synonymous with growing daily investor trade since the pandemic, reported net income of $ 363 million, $ 7 million less than expected in the fourth quarter of 2021. Net losses were $ 423 million.
Robinhood is growing rapidly – adding 10 million funded accounts to its platform in 2021 and doubling in size – with more than half of new entrants being first-time investors. The January market correction was the first test of how new stock traders, who know only emerging markets, would react to the downturn, analysts said.
Robinhood went public in July with great fanfare, valued at $ 38 per share. But the brokerage company faced headwinds as the forces that pushed it to its high initial valuation of public offering, such as fiscal stimulus and bullish markets, stalled. The broker’s shares lost two-thirds of their value after the IPO and fell 83% from a $ 85 peak in August. The stock price was $ 10.20 in after-hours trading.
The broker’s main source of income, payment for the flow of orders, also slowed down. For the quarter, Robinhood’s revenue from a system in which large retailers pay brokers for their orders rose 12 percent to $ 263 million a year earlier, but slowed from the previous quarter when it made $ 267 million in transaction revenue.
Revenue from cryptocurrency trading, which is vital to the company’s revenue, rose 304 percent from the same quarter last year to $ 48 million, but fell from $ 51 million in the third quarter.
Robinhood is focusing on new products such as savings products to diversify its revenues, placing significant hopes for the future of its cryptocurrency portfolio. Crypto wallets are expected to launch in late March.
Vlad Tenev, co-founder and CEO, said: “This year we will expand our ecosystem of products that make Robinhood the best place to start investing.”
The broker’s results come almost exactly a year after thousands of retailers organized on the social media platform Reddit to raise the prices of a handful of lucky companies like GameStop.
The ensuing trading craze has led millions of people to join retail brokerage platforms, delivering tremendous growth to these companies. But those levels of trade have never been sustainable, analysts said.