Falling Asset Prices Could Widen Robinhood's Q1 Losses, Though Interest Revenue Grows

People wait in line for t-shirts at a pop-up kiosk for the online brokerage Robinhood along Wall Street.

Spencer Platt / Getty Images

Robinhood Markets Inc. (HOOD), among the largest online brokerages by assets managed, is poised to report a ninth straight quarter of net losses in the first quarter of 2023 as cryptocurrency trading remains weak, even as net interest revenue surges.

Key Takeaways

  • Robinhood probably lost $484 million, or 62 cents a share, in the first quarter of 2023.
  • Total revenue could rise 43% year-over-year to $428 million, boosted by a 253% increase in net interest revenue.
  • Monthly active users probably plunged by a quarter to 12 million as the equities rally wobbled and cryptocurrency activity remained muted.

Robinhood is expected to report a loss of more than $484 million for the quarter, a nearly 25% increase from the same quarter a year ago, according to analyst estimates compiled by Visible Alpha. Diluted earnings per share (EPS) are forecast to be -$0.62, compared with -$0.45 in the year-ago quarter.

Operating expenses are forecast to rise 43% over last year. The majority of that increase could stem from a near-doubling in general and administrative expenses that are expected to contract throughout this year. Nonetheless, higher expenses could completely offset a forecast 43% increase in revenue.

Robinhood reports results after markets close on Wednesday, May 10.

Robinhood's results could underscore the strangeness of the retail-trading frenzy that quadrupled the brokerage's revenue between the first quarters of 2020 and 2021. Transaction volume is expected to have steadied last quarter after tumbling for four straight quarters, while the platform's monthly active user count is forecast to continue falling by nearly 25%.

Rising interest rates have hurt asset values, but they allow Robinhood to charge more interest on margin balances and other lending. Net interest revenues are expected to more than triple to $194 million for the quarter.

Increasing interest rates could pose a new opportunity for Robinhood, as it chases savers with its Robinhood Gold subscription service. Gold subscribers earn higher yields on uninvested cash that is swept from their brokerage account to partner banks.

Robinhood shares have shed almost a quarter of their value in the last year, while the benchmark S&P 500 Financials Sector Index is down about 13%.

One-Year Trailing Total Return for S&P 500 Financials Sector Index and Robinhood
Source: TradingView.
Robinhood Key Stats
  Estimate for Q1 FY 2023 Actual for Q1 FY 2022 Actual for Q1 FY 2021
Adjusted Earnings Per Share ($) -0.62 -0.45 -6.26
Revenue ($M) 428.2 299.0 522.2
Monthly Active Users (M) 12.0 15.9 17.7

Source: Visible Alpha

The Key Metric: Monthly Active Users

Robinhood counts as monthly active users (MAU) every individual who makes a debit card transaction, transitions between two screens on a mobile device, or loads a web page while logged into their account at any point in a calendar month. A client doesn't need to have a funded account or to be active in successive months to be counted as a monthly active user.

Robinhood's MAUs are predicted to fall by a quarter to 12 million for the first three months of the year. This would be the company's second-lowest quarterly MAU count since 2020.

Article Sources
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  1. Visible Alpha. "Financial Data."

  2. Robinhood Markets Inc. "Robinhood Q1 2023 Earnings."

  3. CNBC. "Apple and fintechs like Robinhood chase yield-hungry depositors as Fed rate hikes continue."

  4. Robinhood Markets Inc. "2022 Annual Report," Page 72.

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