Robinhood stock drops as cooling cryptocurrency market leads to lower-than-expected profits

Reuters, October 28 - In pre-market trading on Wednesday, Robinhood (HOOD.O) shares fell by 8% after a continued slump in the cryptocurrency market caused the trading platform’s third-quarter profit (link) to fall short of Wall Street expectations.

So far this year, changing expectations about US interest rates, outflows from Bitcoin exchange-traded funds (ETF), and repeated bouts of risk-off sentiment have put pressure on the cryptocurrency market, undermining investor confidence and triggering several rounds of sell-offs.

Details are as follows:

• Robinhood’s cryptocurrency business revenue for the third quarter fell by 55% to $120 million

• Rising oil prices and heightened geopolitical tensions have fueled market anxiety, while increased volatility has prompted retail traders to withdraw from speculative trades

• According to estimates compiled by London Stock Exchange Group (LSEG), Robinhood’s quarterly earnings per share fell by 16% to 51 cents, missing Wall Street’s forecast of 55 cents

• Bitcoin BTC=, the world’s largest digital asset by market capitalization, has fallen nearly 28% over the past three months

• Despite major market swings this quarter, Wall Street analysts remain optimistic about Robinhood’s long-term growth prospects

• Kenneth Worthington of JPMorgan wrote in a report: “We believe Robinhood’s core brokerage business will continue to perform well in what is an almost perfect environment for retail traders at present.”

• The company, once highly reliant on trading revenues and retail sentiment driven by market volatility, has in recent years rapidly expanded its offerings, transforming into a full-service financial services company

• Its third-quarter total net income increased by 12% to $1.42 billion

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