Robinhood revenue plummets as retail falters


Robinhood’s revenue fell more than expected in the first quarter as pandemic-era retail fervor for meme stocks and cryptocurrencies waned in the wake of market uncertainty .

U.S. retail brokerage revenue fell 43% from a year ago to $299 million in the first quarter of 2022, less than Wall Street estimates of $356 million, according to analysts polled by Refinitiv and below its own forecast.

The results come as retail brokers who have experienced a boom due to the coronavirus pandemic are reporting a pullback from retail investors compared to 2021 figures. Market uncertainty, rising interest rates, the lack of fiscal stimulus, the return to pre-lockdown routines and inflation, which is compressing household results, have contributed to investors’ reluctance to invest.

Robinhood shares fell 11% in after-hours trading to $9.02.

“We see our customers affected by the macroeconomic environment, which is reflected in our results this quarter,” said Jason Warnick, Chief Financial Officer.

The broker that helped popularize commission-free stock trading with investors during the pandemic has struggled since its highly anticipated IPO last summer. It has lost almost 75% of its value since its debut.

Earlier in the week, Robinhood announced that it was laying off around 9% of its total staff.

“When stocks are going up and the money is easy, brokerages are good,” said Dan Dolev, analyst and managing director at Mizuho Securities. “But as soon as you’re in a bear market, people shirk, they close accounts.”

Robinhood has grown rapidly over the past year, adding 10 million funded accounts to its platform in 2021 and doubling in size, with more than half of new sign-ups from new investors. But it has struggled to sustain that growth and has been slow to add additional products to its customer offerings, analysts said.

Robinhood’s main source of revenue, a controversial practice of selling customer transactions known as payment for order flow, was hit hard in the first quarter. The company’s revenue from order flow payment for the quarter fell 48% from a year earlier, to $218 million, and slowed from the previous quarter, when it made $264 million. dollars of transaction-based revenue.

The decline was driven by a sharp decline in equity trading revenue, which fell 73% from the same quarter last year to $36 million, and fell $52 million in the previous quarter. . Revenue from cryptocurrency transactions fell 39% to $54 million in the first quarter.

In a call after the results, the brokerage said retail clients had been more cautious given the complex economic environment and clients with smaller balances were trading less. The brokerage said it remains “focused on monetizing” its clients, especially its more advanced traders.

Average revenue per user fell 62% to $53 in the first quarter of 2022, compared to the same period in 2021. But monthly average users remained high for the broker, falling only 10% from the highs of the first quarter of 2021. .

The company reported a net loss of $392 million or 45 cents per share, compared with a net loss of $1.4 billion or $6.26 per share in the year-ago quarter.

The broker is pinning its hopes for expansion on its crypto business, and last week Robinhood agreed to buy British crypto firm Ziglu as part of this effort to focus beyond stock trading, as well than making a second attempt to break into the UK market after a canceled launch in 2020. The broker finished rolling out its crypto wallet feature to US clients this week.

Dolev noted that “Robinhood is just catching up with the extravagant Covid business boom, they are a year away from their toughest [comparison] already.”


Comments are closed.