Robinhood is profiting from the resurgence of the cryptocurrency craze

Robinhood Markets Inc. NASDAQ: HOOD is an online financial services and brokerage firm offering commission-free stocks, exchange-traded funds (ETFs), and options trades with access to cryptocurrencies through its mobile app platform. The simplified interface is aimed at new and small investors. The company spearheaded the era of zero-commission trading in an effort to democratize the markets. It also helped fuel the meme stock mania of 2021. Robinhood shares rose as high as $85 in August 2021 and fell to a low of $6.81 in June 2022.

Leading the zero-commission trading revolution

Robinhood is credited with forcing major online retail brokers like Charles Schwab Inc. NYSE:SWTD Ameritrade, Morgan Stanley NYSE: MS owned by e-commerce and Interactive Brokers Group Inc. NASDAQ: IBKR adopt zero commission operations. Brokers had no choice but to move to a commission-free trading commission program or risk losing market share to Robinhood and the brokers that did so. Fintech platforms such as SoFi Technologies Inc. NASDAQ: SOFI it has also adopted zero commission operations.

Controversies

Robinhood has faced scrutiny over how it generated revenue by selling order flow rather than charging commissions. Additionally, she has come under scrutiny for the lack of telephone support and email-only customer service, which she has since added. The company received a public lashing during the GameStop Co. NYSE: GME led memes to short squeeze mania in 2021 when they imposed trading restrictions. The company was sued, but won the dismissal of the GameStop lawsuits in 2023. The company has come full circle and is starting to grow again with stock market and cryptocurrency rallies.

A strong close to 2023

Robinhood reported fourth-quarter 2023 earnings per share of three cents per share, beating consensus estimates by four cents. GAAP net income was $30 million and adjusted EBITA was $133 million. Robinhood received positive net transfers from all major brokerage competitors, which helped fuel strong net deposits of $4.6 billion in the quarter. Revenue increased 224% year-over-year to $471 million, beating consensus analyst estimates of $454.73 million. Full-year 2023 revenues reached a record $1.9 billion, up 37% year-over-year.

Q4 2023 metrics

Net interest income grew 41% year-over-year to $236 million, driven by growth in interest-earning assets and rising short-term interest rates. Transaction-based revenue increased 8% year-over-year to $200 million, led by cryptocurrency revenue of $43 million. Equity trading revenue increased 10% year over year to $25 million, offset by a 2% decline in options revenue of $121 million. Total operating expenses fell 17% year over year to $445 million. Assets under custody (AUC) increased 65% year-over-year to $102.6 billion. Average revenue per user (APRU) grew 23% year over year to $81.

Abandonment of metrics

The company ended 2023 with $4.8 billion, down from $6.3 billion in 2022. The decrease was primarily due to the company’s repurchase of 55 million shares, the acquisition of X1 became Robinhood Credit and to the shift of part of the company liquidity into investments. Monthly active users (MAU) fell 4% year over year to 10.9 million. Its premium Robinhood Gold subscriptions increased 25% year over year to 1.42 million. The company added 11 bitcoin spot ETFs after they were approved by the US Security and Exchange Commission (SEC).

Outlook for 2024

Robinhood plans to continue investing in growth investments in 2024 while driving international expansion. Total GAAP operating expenses and combined non-GAAP and SBC adjusted operating expenses for full year 2024 will be between $1.85 billion and $1.91 billion. The company kicked off its global expansion in the UK and EU.

Robinhood CEO and co-founder Vlad Tenev commented: “2023 was a strong year as our product velocity continued to accelerate, our trading market share increased, and we began to expand globally And we’re off to an even better start in 2024, as we’ve already attracted more funded customers and net deposits in the first half of Q1 than in all of Q4 2023.”

Robinhood analyst ratings and price targets I’m on MarketBeat. Robinhood peers and competitor stocks can be found with MarketBeat Stock Screener.

Daily mug template

The daily candlestick chart on HOOD shows a cup pattern, which completes after forming a rounded bottom. The cup lip line started with a high of $13.51 on December 27, 2023. HOOD fell to a low of $10.38 on January 19, 2024, before triggering a breakout of the market structure low (MSL) through the $11.17 trigger. HOOD hit a rounded bottom ahead of its Q4 2023 earnings release. The strong report caused shares to form a price gap to $12.77 from $11.94 and complete the cup pattern as HOOD it recovered through the $13.51 lip line. The daily relative strength index (RSI) has risen above the 70 band. Pullback support levels are at $12.77, $11.94, $11.17, and $10.64.

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