Robinhood Headed for Latest Loss in Q3 2022 Earnings

Key Takeaways

  • Robinhood is predicted to put up an adjusted lack of 13 cents per share Nov. 2 after market shut.
  • Income and buying and selling volumes have declined since peaking within the first half of 2021.
  • The SEC has reportedly opted to not ban cost for order move, however it might impose different guidelines that might threaten Robinhood’s major income.
  • Margin curiosity earnings was up sharply in Q2 over Q1 due to rising rates of interest.

Robinhood Markets Inc. (HOOD), the brokerage common with younger retail buyers, in all probability misplaced 13 cents a share within the third quarter, marking its seventh straight quarterly deficit as purchasers keep away from buying and selling amid a bear market in shares and cryptocurrencies, in keeping with estimates from Seen Alpha. Nonetheless, if income drops simply 3%, as analysts count on, it will be a step up from declines of greater than 40% on a 12 months over 12 months foundation within the 12 months’s first two quarters.

Nonetheless, the variety of month-to-month lively customers (MAU), a measure of Robinhood’s engaged consumer base, is predicted to slip to 13.7 million, a couple of third lower than the height of 21.3 million within the second quarter of final 12 months. The corporate had 13.3 million customers in August and 13.2 million in July.

Robinhood did get some welcome information in September, when Bloomberg reported that the Securities and Change Fee (SEC) determined that it would not ban the follow of cost for order move, as SEC chair Gary Gensler had instructed it’d. The follow is essential to Robinhood’s working mannequin, for the reason that dealer affords its purchasers no-fee trades so it may well funnel them for execution to the market-makers who pay Robinhood for the order move.

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Whereas the SEC could have determined towards an outright ban, it is nonetheless mulling guidelines that might undermine the worth of Robinhood’s order flows, together with one requiring execution at or above the midpoint of the bid-ask unfold for commerce orders from retail buyers.

Robinhood’s buyers are buying and selling far lower than they did a 12 months in the past, in keeping with month-to-month statistics launched by the corporate. Day by day common income trades in equities have been down 25% 12 months over 12 months in August, whereas notional buying and selling quantity was down a extra modest 10%.

The corporate is benefiting from rising rates of interest by charging its clients larger charges on their margin balances. Internet curiosity earnings elevated 35% sequentially to $74 million within the second quarter, accounting for 23% of internet income.

Robinhood’s share worth is down 33% in 2022, however it’s up 73% from its mid-June low.

Supply: TradingView.

Supply: TradingView

Robinhood Earnings Historical past

In August, the corporate reported a smaller Q2 loss than analysts anticipated, whereas income and MAU fell wanting estimates. The inventory gained practically 12% the following day.

The Q1 report in late April wasn’t as effectively obtained, leaving the share worth 2.8% decrease within the subsequent buying and selling session. Robinhood’s loss was deeper than the consensus estimate, whereas income and MAU additionally disenchanted.

Robinhood Key Stats

  Estimate for Q3 FY 2022 Q3 FY 2021 Q3 FY 2020
Adjusted Earnings
Per Share ($)
-0.13 -0.11 -0.04
Income ($M) 353.2 364.9 269.5
Month-to-month Energetic
Customers (M)
13.7 18.9 10.7

Supply: Seen Alpha

The Key Metric

Robinhood counts as month-to-month common customers (MAU) each particular person who makes a debit card transaction, transitions between two screens on a cellular gadget, or masses an online web page whereas logged into their account at any level in a calendar month. A consumer does not must have a funded account or to be lively in successive months to be counted as a month-to-month lively consumer. The corporate says it considers these customers to be a helpful metric of engagement positively correlated with income and different efficiency metrics.