Robinhood's
Robinhood made its debut in late July at around $40, so it remains 12% higher from its opening print. The IPO was unique as it allowed Robinhood users to buy in at the pre-IPO price. And, the stock did have a nearly 100% rally in its first couple of weeks of trading. However, the company has given up these early gains and seems to have found a new equilibrium. Currently, Robinhood's stock price seems more correlated to the performance of cryptocurrencies, speculative stocks, and options trading volumes.
Inside the Numbers
In Q2, Robinhood reported that its revenue was 131% higher to $565 million which was above expectations of $555 million. Robinhood continues to lose money as it focuses on growth as it reported a loss of $2.16 per share which also was in line with expectations.
Revenue from crypto trading was $233 million which was more than half of the $451 million of trading revenue in Q2. This was a sharp increase from crypto accounting for 17% of total revenue in Q1.
It added that more than 60% of users engaged in crypto trading. It was also a massive increase from last year when crypto only accounted for $5 million in revenue. Another interesting note is that dogecoin accounted for 37% of crypto revenue, and there are obvious doubts about the sustainability of this revenue source. Options trading contributed $165 million in revenue with another $52 million coming from equities.
Assets under custody increased by 205% to $102 billion, a big increase from $33 billion in last year's Q2. Total funded accounts reached 22.5 million as of Q2 an increase from 18 million in Q1.
However, Robinhood warned that Q3 results could be adversely impacted by a slowdown in trading which has caused shares to decline 8% in the following session and continue drifting lower.
According to the company, "For the three months ended September 30, 2021, we expect seasonal headwinds and lower trading activity across the industry to result in lower revenues and considerably fewer new funded accounts than in the prior quarter."
Stock Price Outlook
Another item weighing on the stock is that 97.9 million shares are expected to be sold in the coming months by insiders. This is significant given its current float of 500 million and average daily volume of 15 million shares.
There's a lot to like about Robinhood given its incredible growth and popularity with Millennials and Generation Z. However, the stock has many of the same issues as other growth stocks in that it will have to keep its growth up to validate its current market cap.
In the near term, this is dependent on people trading crypto and options. Therefore, the stock should be avoided at current prices and investors should remain patient and wait for lower prices.
