Robinhood Shares Swing in Volatile Session After Missing Earnings

Robinhood Markets Inc. HOOD Shares 9.65%

swung wildly on Friday, a day after the brokerage reported a fourth-quarter loss of $423 million.

The company’s stock price fell 14% in early trading, dropping below $10 for the first time in intraday trading, before turning positive again. The stock ended up around 9.7%, settling at $12.73. It is down 28% in 2022.

The volatile session came after the company’s fourth quarter results missed analysts’ expectations. Brokerage, used by individual investors, posted revenue of $363 million for the October-December period, an increase of 14%. Analysts polled by FactSet had expected quarterly revenue of $376 million and a net loss of $225 million.

For the year, Robinhood reported an 89% increase in revenue to $1.82 billion from $959 million the previous year. Its net loss totaled $3.7 billion for the year.

The company experienced an increase in technology and administrative expenses which weighed on its results.

Revenue from options and cryptocurrency trading increased in the last quarter compared to the previous year, reflecting the desire of individual investors to embark on riskier and more speculative trading strategies in 2021. client options trading revenue increased 14% to $163 million.

The company said fourth-quarter equity trading revenue fell 35% to $52 million from $80 million in the same quarter of 2020, the period before retail investors stormed the markets. markets in January 2021 to wage a guerrilla war against hedge funds.

Robinhood has become a darling of the Covid-19 era, as millions of new investors have started trying their hand at trading. The brokerage now has 22.7 million customers with funded accounts, it said Thursday, up from 12.5 million in 2020.

The company faces fierce competition. Large asset managers such as Fidelity Investments and BlackRock Inc.

have used their size to increase profits while reducing costs. They also focused on adding products with higher fees.

Robinhood started the first half of 2021 in a strong position as millions of investors entered the market to trade stocks from memes such as GameStop Corp.

and cryptocurrencies such as dogecoin. Yet as the year progressed, it was difficult to maintain momentum. The company experienced a slowdown in revenue from customer trades. Cryptocurrency trading revenue was hit particularly hard in the third quarter. This trend continued in the fourth quarter, as revenue from cryptocurrency trading fell around 5.9% from the July-September period.

The recent surge of Shiba Inu Coin, and the resulting decline in value, is part of a growing trend of meme coins that rival some of the largest digital tokens in the world. WSJ retail investment reporter Caitlin McCabe explains why investors are pouring money into this meme-based cryptocurrency. Photo: Amber Bragdon/Getty Images

The new year did not bring relief as trading continued to decline, the company said.

Robinhood said it expects first-quarter revenue of less than $340 million, a figure that would represent a 35% year-over-year decline.

Jason Warnick, Robinhood’s chief financial officer, said on a media call that business activity has picked up in recent days.

Mr. Warnick said the company plans to roll out products focused on longer-term investments. He said the company plans to start introducing tax-advantaged retirement accounts mid-year and there is an opportunity to expand internationally, particularly in the cryptocurrency space.

The company this month began rolling out cryptocurrency wallets for select customers, he said. The move allows these customers to move their crypto holdings in and out of the Robinhood app.

Robinhood shares have been punished lately as investors turn away from the growth companies that were popular last year. Robinhood is down about 67% from its IPO price of $38 per share.

Write to Caitlin McCabe at [email protected]

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Appeared in the January 28, 2022 print edition as “Robinhood Posts Loss, Sending Stock Into Nose-Dive”.

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