TLDR
- Robinhood stock surged 14% Friday to $82.82 but remains 46% below its $152 October peak after crypto selloff
- Crypto trading generates 36% of transaction revenue, exposing the company to Bitcoin’s 50% crash from October highs
- Q4 earnings Tuesday expected to show strong equity and options trading as margin debt hit record $1.2 trillion
- New products like credit cards and banking contribute minimal revenue despite “super app” ambitions
- Prediction markets face uncertain future as NFL season ends and sustainability questions mount
Robinhood stock jumped 14% Friday to $82.82, offering relief after weeks of losses that erased 46% of the stock’s value from its October 9 high of $152. Trading volume surged to 53.9 million shares, nearly double the daily average of 27.8 million.
The rebound followed a broader market rally led by Nvidia’s 7% gain. Analyst upgrades also supported the recovery, with several firms highlighting diversification efforts that could reduce the company’s reliance on volatile crypto trading.
Bitcoin’s collapse drove much of Robinhood’s decline. The CoinDesk Bitcoin Price Index dropped 50% from its October peak of $126,272.76. Bitcoin recovered 12% Friday, tracking closely with Robinhood’s bounce.
Crypto trading accounted for $680 million of the $1.85 billion in transaction-based revenue for the nine months ending September 30. That’s roughly 36% of total transaction revenue. Options trading generated $809 million during the same period.
Earnings Preview and Trading Strength
Robinhood reports Q4 earnings Tuesday. Analysts expect results will show continued strength in equity and options trading despite the crypto headwinds.
Margin debt hit a record $1.2 trillion in December, according to Finra data. Retail investors have been borrowing heavily to trade stocks during the bull market run.
The S&P 500 has gone flat this year. Piper Sandler analyst Patrick Moley warned of “growing uncertainty about the sustainability of recent retail trading strength” in a February 2 note.
Moley maintains an Overweight rating with a $155 price target. He views Robinhood as “the best way to play secular growth in retail trading” and the closest fintech to “super app” status.
Truist cut its price target to $130 from $155 but kept a Buy rating. KeyCorp raised its target from $135 to $155 with an Overweight rating.
Super App Strategy Shows Limited Progress
Robinhood has expanded into credit cards, banking, and financial advice to build a comprehensive financial platform. The strategy aims to reduce dependence on trading revenue.
Progress has been slow. Credit cards contributed just $40 million of the $1.1 billion in net interest revenue for the nine months ending September 30.
J.P. Morgan analyst Kenneth Worthington rates the stock Neutral. He noted “a meaningful gap between the products offered and scale of Robinhood versus its larger competitors” in a February 4 note.
Prediction markets emerged as the fastest-growing new product. Users bet on event outcomes through binary yes/no contracts.
College and pro football made up roughly half of prediction market volumes from September to January, according to Moley’s estimates. The NFL season concludes Sunday with the Super Bowl, raising questions about whether betting volumes will hold up for other sports.
Insider selling added to investor concerns. Steven Quirk sold 52,540 shares at $87.81 on February 3. Daniel Martin Gallagher Jr. sold 10,000 shares at $87.07 the same day, reducing his stake by 2.48%.
The company carries a market cap of $74.47 billion with a P/E ratio of 34.37. Institutional investors own 93.27% of outstanding shares.
