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Robinhood shares dropped sharply early Friday after posting an earnings flop that saw its number of users shrink — but by midmorning, the stock had bounce off lows and was trading more than 3% higher as bargain hunters swooped in.
Still, the battered-down stock is down nearly 35% just since the beginning of 2022 — and is down even more — 65% — over the past year, illustrating just how out-of-fashion the platform that powered the meme stock craze has become.
“Robinhood was one of the pandemic darlings,” Art Hogan, chief market strategist at National Securities in New York, said. “Almost exactly a year ago, it sat at the center of the meme stock mania. And that has clearly cooled off as we headed into a new year.”
The earnings report comes as both cryptocurrencies and equities have been hammered in recent days: Bitcoin dropped 50% last week and the S&P 500 is down more than 10% so far this year.
Robinhood late Thursday reported $423 million in losses in the fourth quarter compared to a profit in the same period last year. Its costs also more than doubled. Meanwhile, the number of active users also declined — another warning sign for the online broker.
“Its popularity seems to be on the decline,” Hogan said “And its revenue growth is following in the wake of its declining popularity. So when you when you sum all that together, it likely has a choppy road in front of it.”
Robinhood shares had opened sharply lower Friday — dropping from $11.61 per share to $9.97 a share in the opening minutes of trade. As noontime approached, though, the stock had reversed, and was up more than 3% to $12.14 a share.
According to data from FactSet, analysts had predicted revenue of $376 million and a net loss of $225 million in the fourth quarter.
And the growth outlook of the company appears dim as the number of monthly active users dips. In the third quarter, there were 18.9 million monthly active users — that number dropped to 17.3 million in the fourth quarter.
Robinhood — known for its role in the “Reddit Rally” retail trading phenomenon — went public at $38 a share in July. But it’s taken an 85% nose dive since then.
Meme stocks including GameStop and AMC — which helped raise Robinhood’s profile have been battered-down in recent days as the stocks fall out of fashion a year after the craze began.
Robinhood is also facing a slew of potential regulatory challenges.
CEO Vlad Tenev was called to testify before Congress in February over the company’s controversial decision to halt trading in stocks popular with the Reddit Rally crowd, like GameStop and AMC, resulting in questions about its business model.
President Biden’s SEC chief Gary Gensler has since vowed to look into the company’s practice of selling customer order flow to high-speed trading firms like Citadel Securities.
“There are costs,” Gensler has said of Robinhood’s no-fee trading model. “The costs are below the surface.”
With Post wires
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