Robinhood Headed For 8th Straight Quarterly Net Loss

Plunging asset prices and controversy over brokerage's payment for order flow practice have depressed trading

Robinhood Icon on a phone screen

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Key Takeaways

  • Robinhood will likely post fourth-quarter adjusted EPS of -$0.15 vs. -$0.49 for the prior-year quarter.
  • Revenue probably climbed 8% to $391.4 million.
  • Robinhood's monthly active user figure is expected to have dropped 28% year-over-year, reflecting the toll dropping asset prices and inflation have taken on client trading interest.

Robinhood Markets Inc. (HOOD), the online brokerage popular among young retail investors, probably lost 15 cents a share in the fourth quarter, its eighth consecutive quarter of losses amid a downturn in stocks and cryptocurrencies that coincided with trading skittishness.

Robinhood's loss likely narrowed to $136.6 million from $423.3 million in the same quarter a year ago, according to estimates from Visible Alpha. The company's bottom line improvement stems mostly from a 33% reduction in operating expenses. Total revenue is expected to be $391.4 million, up 8% year-over-year. The company announces results after markets close on Feb. 8.

Declining asset prices have discouraged Robinhood's retail investor clientele in the last several quarters. Inflation and rising interest rates also contributed to lackluster trading activity, although higher rates allow Robinhood to charge clients more interest on their margin balances. Robinhood's net interest revenue for the last three months of the year is expected to be $159.3 million, a record and almost triple the figure from the prior-year quarter.

The brokerage has also been dogged by allegations that it hides true trading costs as it offers customers "commission-free" trades. Robinhood relies on the practice of payment for order flow, through which it receives fees from the market-makers executing customer trades. A U.S. judge determined in January that the company must face a lawsuit alleging it concealed the actual cost to customers of commission-free trading.

External pressures forced Robinhood to announce two rounds of sweeping layoffs in 2022, including a reduction of 23% of its staff in August.

Robinhood shares have fallen 24% in the last year, compared with an 11% drop for the S&P 500 Information Technology Index.

One-Year Total Return for S&P 500 Information Technology Index and Robinhood
Source: TradingView.
Robinhood Key Stats
  Estimate for Q4 FY 2022 Actual for Q4 FY 2021 Actual for Q4 FY 2020
Adjusted Earnings Per Share ($) -0.15  -0.49 0.02
Revenue ($M) 391.4 362.7 317.5
Monthly Active Users (M) 12.3 17.3 11.7

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 is expected to report a 28% plunge in MAUs and the second-lowest quarterly figure in the last two years.

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

  2. Robinhood Markets Inc. "Robinhood Markets, Inc. to Announce Fourth Quarter and Full Year 2022 Results on February 8, 2023."

  3. Barron's. "Robinhood Has Something Coinbase Doesn’t. How It Can Help in a Crypto Winter."

  4. Reuters. "Robinhood must face customers' lawsuit alleging it hid trading costs."

  5. Robinhood. "A Message From Our CEO and Co-Founder Vlad Tenev."

  6. Robinhood Markets Inc. "Form 10-K for the Fiscal Year Ended Dec. 31, 2021," Page 68.

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