Robinhood, the popular trading app, is preparing to announce its highest quarterly revenue in nearly three years, signaling a notable rebound in the stock markets and cryptocurrency trading.
Rising bets on global interest rate cuts earlier this year boosted U.S. stocks and bitcoin to record highs, luring traders back into the market and boosting transaction-based revenue for the retail-focused brokerage.
Having been at the epicenter of the meme stock frenzy in 2021, Robinhood is now recovering from a slowdown in retail trading activity that followed a surge in trading during the pandemic.
Analysts at JP Morgan noted: “We witnessed a substantial rebound in volumes this quarter across equities, options and cryptocurrencies, with total volumes up nearly 20% in reported Q1 metrics through February.”
This resurgence in retail trading activity drove Robinhood shares up 58% in the first three months of the year, marking the most significant quarterly stock gain since its listing.
Perspectives:
According to data from research firm Apptopia, Robinhood’s daily active users increased 65% in March from a year ago, while total new mobile app downloads soared 94% during the same period.
Menlo Park, California-based Robinhood, known for popularizing commission-free trading, is expected to benefit from an increase in net interest income. The platform allows certain clients to borrow money to purchase securities.
Net interest income, the company’s main revenue driver, is expected to rise 24% to $258.24 billion in the first quarter.
Piper Sandler analyst Patrick Moley commented: “Online retail brokers saw solid growth in both trading volumes and margin loan balances and are set to continue benefiting from higher rates for longer.”
Robinhood’s assets under custody (AUC) surpassed the $100 billion mark for the second consecutive month in February. The company reported a surprise profit in the final quarter of 2023 and is targeting profitable growth in 2024.
Key figures:
-
Robinhood is expected to report its strongest quarterly revenue since the second quarter of 2021.
-
Analysts anticipate a 24% increase in revenue to $548.61 million, driven by growth in net interest income.
-
Cryptocurrency trading revenue is expected to double from a year ago to $80 million.
Market outlook:
-
The average recommendation of 17 brokerages that cover Robinhood is “hold.”
-
The company’s average price target is $19, reflecting a 65% increase from three months ago.
-
Robinhood is trading at 64.01 times its forward earnings estimate, compared to the industry average of 10.97.
-
While the stock hit a more than two-year high in late March, its value has more than halved since its market debut in July 2021.
Also read: Three AI stocks that will shine through the rest of 2024