robinhood app

Robinhood stock (NYSE: HOOD) is trading higher in premarkets today despite missing revenue estimates for the fourth quarter of 2022. Crypto winter and the exodus of retail traders from stock markets continue to take a toll on the popular retail trading app.

Robinhood reported revenues of $380 million in Q4 2022 which were 5% higher than the previous quarter. The metric trailed analysts’ estimate of $397 million. Looking at the revenue mix, the company’s transaction-based revenues fell 11% sequentially to $186 million. However, its net interest revenues rose 30% over the period to $167 million.

Furthermore, while its options revenues were flat at $124 million, equity revenues tumbled 24% to $39 million. Revenues from cryptocurrencies also fell 32% to $21 million.

To put the numbers in perspective, in Q2 2021, which was the first quarter when Robinhood reported results as a publicly-traded company, its transaction-based revenues were $451 million. Of this, $233 million came from cryptocurrencies alone. That quarter, HOOD earned more revenues from crypto trading than stocks and options combined.

Meanwhile, Q2 2021 was the peak for Robinhood’s revenues. That quarter, it benefited from the frenzied trading in meme stocks as well as meme cryptocurrencies. The meme stock mania has since faded.

To make things worse, retail trading activity in stocks and options has also been tepid due to the crash in markets. The continued crypto winter has also taken a toll on Robinhood’s earnings.

While the crypto markets have tanked many analysts recommend allocating a portion of your portfolio toward digital assets. There is a guide on how beginners can buy cryptocurrencies safely and with low fees.

Robinhood Reported Lower Users in Q4 2022

In Q4 2022, Robinhood had 11.4 million active users which was below the 12.2 million in the previous quarter. The company’s MAUs have fallen for six straight quarters and like the revenues, the MAUs also peaked at 21 million in Q2 2021. The company’s MAUs are now at the lowest level since 2020.

Robinhood posted a net loss of $166 million in Q4 2022 which was narrower than the $175 million loss in the previous quarter. In Q4 2022, it also incurred a $57 million loss on “processing error” in Cosmos Health stock.

“A processing error caused us to sell shares short into the market, and although it was detected quickly, it resulted in a loss of $57 million as we bought back these shares against a rising stock price,” said Robinhood CFO Jason Warnick.

To put that in perspective, Cosmos Health’s current market cap is only about $53 million. HOOD CEO Vlad Tenev described the error as “really disappointing.”

Tenev and Bhatt Forgo $500 Million Worth of Stock-Based Compensation

In his prepared remarks, Tenev said that he along with co-founder Baiju Bhatt have canceled almost $500 million of stock-based compensation, “to ensure the company has as many resources as possible to deliver value to customers and shareholders.”

Among other companies, Apple CEO Tim Cook also took a voluntary cut to his 2023 compensation. Alphabet also reduced the compensation of senior executives while Zoom Video Communication CEO Eric Yuan lowered his fiscal year 2023 salary by 98% and said that he would forgo the bonus.

Robinhood Looking to Buyback Sam Bankman-Fried’s Shares

Last year, FTX founder Sam Bankman-Fried was on a buying spree and bailed out several struggling crypto exchanges. He also took a 7.6% stake in Robinhood in May and said that the stock is an “attractive investment.”

As things turned out, FTX also filed for bankruptcy. Robinhood is now meanwhile looking to buy back the shares that Sam Bankman Fried’s investment vehicle Emergent Fidelity Technologies Ltd holds.

Robinhood said that the proposed buyback “underscores the confidence the Board of Directors and management team have in our business.”

Emergent too filed for bankruptcy shortly after FTX. Robinhood stressed, “Since there is limited precedent for this type of situation, we cannot predict when, or if, the share purchase will take place.”

The proposed buyback seems to have charged up the bulls and HOOD stock is up over 5% in premarkets. Stock futures are also in the green and US markets look set to open in the green.

Disney stock is also up sharply after the company impressed markets with its December quarter earnings and its CEO Bob Iger provided more insights into the transformation plan.

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