The Dogecoin Effect: Robinhood (HOOD) Stock Plunges 11% on Disappointing Results as Crypto Trading Revenue Plummets, Expects Headwind to Continue in Q4; Analyst Lower PTs

October 27, 2021 8:21 AM EDT
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Price: $27.18 +0.41%

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    7 Buy, 5 Hold, 1 Sell

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Shares of Robinhood (NASDAQ: HOOD) are down nearly 10% in pre-open Wednesday after the company reported worse-than-expected Q3 results.

HOOD reported negative EPS of $2.06, worse than the analyst estimate of negative $1.36. Revenue for the quarter came in at $365 million versus the consensus estimate of $431.27 million.

"This quarter was about developing more products and services for our customers, including crypto wallets. More than one million people have joined our crypto wallets waitlist to date. With 24/7 live phone support, we believe that Robinhood is becoming the most trusted and intuitive platform for retail and crypto investors. And looking ahead, we're committed to delivering tax-advantaged retirement accounts to help everyone invest for the long term,” said Vlad Tenev, CEO and Co-Founder of Robinhood Markets.

Transaction-based sales came in at $267 million, including only $51 million from cryptocurrency trading. In Q2, HOOD reported $233 million in sales from crypto trading, driven by a strong interest in trading meme cryptocurrency Dogecoin (DOGE).

“Q2 was kind of one of those idiosyncratic market events where there’s this massive interest specifically in doge. We love it when those moments happen. It’s a great way to bring a lot of new customers onto the platform. But we’re really thinking about investing in crypto over the long term. And so it’s you know, frankly, it’s gonna be impossible for us to accurately predict ... revenue on a quarter-to-quarter basis,” Robinhood CFO Jason Warnick told CNBC.

KeyBanc analyst Josh Beck reiterated an Overweight rating and lowered the price target to $50.00 per share from the prior $55.00 to reflect lower estimates, primarily due to lower crypto volumes.

“Robinhood missed Street revenue expectations by 15% but was off 6% our below-Street estimate, consistent with our preview (link) highlighting Crypto market softness. Positively, the CFO provided a 4Q revenue framework, a helpful guidepost for a business with ST volatility, in our view. We lower our estimates and price target to $50 (SoTP: 19x core FinApp, 10x Crypto) yet remain constructive on several catalysts that could boost strategic perception: 1) Cash Management scaling; 2) fully paid sec-lending; 3) yield enhancements; 4) Crypto wallet launch; and 5) automatic account transfers-in,” Beck said in a client note.

Deutsche Bank analyst Brian Bedell lowered the price target on Hold-rated Robinhood to $40.00 (from $42.00).

“Although modestly better than our estimate on expenses, we believe these results were broadly below Consensus expectations, especially on net revenue (estimated Consensus of $424mn) but also on key customer metrics. We expect these results to pressure the stock on Wednesday although investors embracing the longer-term growth potential may possibly be buyers on weakness which at least partially mitigate downside in the shares,” Bedell wrote in a client note.

Shares closed at $39.57 yesterday.

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