Robinhood Crushes Earnings Estimates with Surge in Retail Cryptocurrency Trading

Robinhood Markets (HOOD) exceeded earnings expectations in the first quarter, driven by a surge in retail cryptocurrency trading. The online broker reported earnings of 18 cents per share, significantly higher than the 6 cents per share that analysts had predicted. Revenue also saw a substantial increase, rising 40% year over year to a record $618 million.

Trading revenues were a major contributor to the strong performance, with a 59% increase to $329 million. This included a significant boost in cryptocurrency revenue, which jumped 232% to $126 million. The company also saw growth in options revenue, up 16%, and equities revenue, up 44%. Net interest revenues increased 22% year-over-year to $254 million.

Despite the positive earnings report, Robinhood disclosed on Monday that it had received a “Wells Notice” from the SEC related to crypto trading on its platform. The notice indicates that the SEC has concluded an investigation and may take enforcement action. The dispute revolves around whether cryptocurrencies are considered securities, with Robinhood arguing that the assets listed on its platform are not.

Following the earnings report, Robinhood stock surged 6.3% in extended Wednesday trading. The stock is up 40% year to date and nearly doubled in the past year, although it remains below its post-IPO high from August 2021. The price of bitcoin, a key driver for Robinhood stock due to its crypto trading, fell modestly on Wednesday to around $62,000.

Analysts are optimistic about Robinhood’s future, with expectations for the company to achieve its first annual profit in 2024. The stock is currently on track to form a base with a 20.55 buy point, according to MarketSmith pattern recognition. Despite the Wells Notice and regulatory challenges, investors seem bullish on Robinhood’s growth potential in the online brokerage space.