Shares of Robinhood – synonymous with YOLO-believing retail traders who threw their money into buying GameStop (GME) - Get GameStop Corp. Class A Report, AMC Entertainment (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report and other companies that seemingly had no long-term plan to profitability – are falling by the double digits.
On Thursday, the Silicon Valley upstart reported fourth-quarter revenue and losses that were worse than analysts’ estimates, and its stock, already down almost 70% since its July initial public offering, plunged, as the company’s forecasts for the current quarter underwhelmed.
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It’s an astonishing retreat for an online retail brokerage that emerged as the democratic bastion for all investors looking to participate in the biggest bull market in U.S. history and quickly became the poster child – and arguably the enabler – for anyone who wanted to hop into the meme-stock get-rich-quick frenzy.
The Menlo Park, California-based brokerage, which ended the regular session with a market value just north of $10 billion on Thursday, tumbled anew on Friday, falling 14% in premarket trading. Robinhood stock is now off 30% for the month, and more than 70% since its IPO last July.
A "Momentous" Year for Robinhood: Vlad Tenev
In a statement accompanying the results, Robinhood co-founder Vlad Tenev dubbed the company’s past 12 months as “momentous,” noting the brokerage nearly doubled the number of customers on its platform.
Momentous indeed. While the customers are there, the trading activity -- what Robinhood needs to make money -- was not: The company posted a steeper-than-expected net loss and saw monthly active users drop about 8% from the previous quarter, with average revenue per user plunging.
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“Let’s not sugarcoat it. We’ve been disappointed with the stock price over the past few months,” Tenev, 34, said on the company’s post-earnings conference call. “The way that we’re thinking about it is as I wrote in my letter in the S1, we’re never going to be sacrificing long-term performance or what’s right for the company to make a quarter. We’re focused on the long term.”
It's the longer-term prospect thar Robinhood can and will re-fill its satchel with profit-generating arrows that investors are fuzzy on – specifically whether Robinhood can re-gain the kind of momentum it saw during last year’s meme-stock frenzy, and more importantly, handle it.
The Meme-Stock Frenzy was "Hard": Tenev
Tenev conceded that last January’s meme-stock frenzy was “hard” on Robinhood, specifically its inability to keep up at times with what its customers were trying to do: place trades on meme stocks.
“We stand for giving people access to markets and letting them trade what they want to trade. And it was disappointing to customers. We realized that, and we've done a lot of investments to make sure that what happened then doesn't happen again.”
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But the damage may already be done, even as – or perhaps especially because – Robinhood is doubling down on its efforts in crypto trading and staking, another sector of the market that more recently has seen better days.
Robinhood said customers placing crypto trades rose 218% year-over-year in the fourth quarter, while crypto DARTs, or daily average revenue trade, meaning the average amount of revenue made on trades on a daily basis, were up 176%.
Crypto assets under custody increased to $22.1 billion, up 528%, while net revenue on crypto trading was $63 million for the quarter, up 1% year-over-year.
Robinhood's Second Act: Crypto
Tenev noted Thursday that Robinhood is aware its customers want more cryptocurrencies on the Robinhood platform and has been proactively engaging with U.S. regulators, even as regulators continue to crack down on cryptocurrencies and crypto-focused investments that they believe are unregistered securities.
The company is also working on rolling out its crypto platform internationally, and it launched a public beta of crypto wallets this month, with plans to release the product to everyone later this quarter.
In the interim, Robinhood is now offering intelligent crypto price alerts. And similar to what it offers for stocks, the company has added an additional venue for crypto that provides increased capacity and liquidity on crypto volume, increasing price competition for orders -- something the company sees adding to future revenue.
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Plus, it's focused on adding more digital coins that can be traded on its platform.
"We continue to hear from customers that they want us to list more coins. We've been proactively engaging with regulators on this," Tenev said. "We're comfortable with how we've analyzed the coins currently on our platform, we have invested in the technology that will allow us to seamlessly add more coins, and we intend to add more coins going forward."
Which in of itself may be why investors are voting with their feet, given the cryptocurrency crunch that continues to generate headlines.