Robinhood’s Impressive Earnings Surge in Pre-Market Trading
Shares of Robinhood (HOOD) experienced a remarkable increase in pre-market trading on Thursday, following the release of their fourth-quarter earnings report, which exceeded Wall Street expectations. This surge was significantly fueled by an extraordinary rise in crypto revenue.
The company reported an impressive $358 million in crypto transaction revenue for the quarter, marking the highest contribution from digital asset trading to date. This information was highlighted in a research report by Wall Street bank JPMorgan (JPM) on Wednesday. In response to these strong earnings, JPMorgan raised its price target for Robinhood’s stock from $39 to $45, while maintaining a neutral rating. Similarly, Citi (C) increased its target from $45 to $60 and also kept a neutral rating on the stock. In a more bullish move, broker Bernstein more than doubled its price objective, raising it from $51 to an impressive $105, while maintaining an outperform rating on the shares.
The stock experienced a robust 13% surge, reaching $63.20 in early trading on Thursday, following the results that were released after the market closed on Wednesday.
Robinhood reported a remarkable 115% increase in fourth-quarter revenue compared to the previous year, totaling $1.01 billion. This figure surpassed Wall Street analysts’ estimate of $945.8 million, according to data from FactSet. The company also noted that transaction-based earnings soared by 200% year-on-year, primarily driven by an astonishing 700% increase in cryptocurrency revenue.
Typically, crypto revenue contributes about 10%-20% of Robinhood’s total revenue, as noted by JPMorgan. The surge in revenue was fueled by a substantial 46% increase in the total cryptocurrency market capitalization during the period, along with a significant rise in Robinhood’s notional volumes, which saw a staggering 393% quarter-on-quarter increase.
Looking ahead, the company has ambitious plans for its crypto business. Management aims to enhance its offerings by adding more tokens, improving its wallet functionality, incorporating an order book with exchange routing capabilities, integrating with Bitstamp, and exploring long-term tokenization possibilities.
According to Citi, Robinhood has benefitted from favorable market trends since the beginning of the year, characterized by “crypto market tailwinds and sustained retail activity.” If this positive momentum continues, the shares are expected to find solid support, although investors should prepare for potential volatility. While Citi has adopted a more optimistic perspective on the company’s fundamental outlook, it advised waiting for a “more reasonable entry point” before making investment decisions.
Bernstein reiterated its stance that Robinhood represents the best opportunity within the broker’s global digital assets coverage. They anticipate continued momentum in the first quarter, driven by crypto volatility and an ongoing price cycle.
