TLDR
- Robinhood shares spiked 14% Friday to $82.82 but trade 46% below the $152 record high reached in October
- Crypto trading accounts for 36% of transaction revenue, leaving the platform vulnerable to Bitcoin’s 50% drop since October
- Tuesday’s Q4 earnings expected to highlight strong stock and options activity with margin borrowing at historic $1.2 trillion
- Banking and credit card ventures contribute minimal revenue despite ambitious super app strategy
- Prediction market revenue sustainability questioned as football season wraps up with Super Bowl Sunday
Robinhood stock jumped 14% Friday to $82.82, providing a breather after relentless selling pushed shares down 46% from the October 9 peak of $152. Trading activity exploded to 53.9 million shares, nearly double the 27.8 million average.
A Nvidia-led market rally drove the rebound. The chip maker surged 7%, lifting risk assets across the board. Analyst upgrades added fuel, with several firms praising Robinhood’s push into new revenue streams beyond volatile crypto trading.
Bitcoin’s crash dealt the heaviest blow. The cryptocurrency tumbled 50% from its October high of $126,272.76 before bouncing 12% Friday in sync with Robinhood’s recovery.
The company pulled in $680 million from crypto trading out of $1.85 billion in total transaction revenue through the first nine months of the fiscal year. That 36% slice creates major exposure to digital asset swings. Options trading delivered $809 million during that window.
Earnings Report Looms With Trading Focus
Robinhood drops Q4 results Tuesday. Expectations point to robust equity and options numbers that could offset weaker crypto performance.
Margin borrowing exploded to a record $1.2 trillion in December, according to Finra figures. Retail investors loaded up on debt to amplify their stock purchases throughout the bull market.
The S&P 500 flatlined this year. Piper Sandler analyst Patrick Moley warned of “growing uncertainty about the sustainability of recent retail trading strength” in his February 2 analysis.
Moley sticks with an Overweight rating and $155 price target. He views Robinhood as “the best way to play secular growth in retail trading” and believes it’s nearing “super app” status in the fintech world.
Price target adjustments rolled in from other firms. Truist slashed its target to $130 from $155 but kept a Buy rating. KeyCorp lifted its target to $155 from $135 with an Overweight rating.
New Products Struggle to Move Revenue Needle
Robinhood rolled out credit cards, banking products, and investment advice to create a one-stop financial shop. The plan aims to smooth out revenue when trading volumes drop.
The numbers tell a different story. Credit cards generated just $40 million of the $1.1 billion in net interest revenue during the nine months ending September 30.
J.P. Morgan analyst Kenneth Worthington assigned a Neutral rating. His February 4 report pointed out “a meaningful gap between the products offered and scale of Robinhood versus its larger competitors.”
Prediction markets stood out as the growth leader. Users place bets on events using straightforward yes/no contracts.
Football ruled the platform. Pro and college games represented roughly half of all prediction market volume from September through January, based on Moley’s estimates. The NFL season ends Sunday with the Super Bowl, raising doubts about whether basketball or other sports can match that engagement.
Recent insider sales caught attention. Steven Quirk dumped 52,540 shares at $87.81 on February 3. Daniel Martin Gallagher Jr. sold 10,000 shares at $87.07 the same day, cutting his stake by 2.48%.
The stock carries a $74.47 billion market cap and trades at 34.37 times earnings. Institutional investors hold 93.27% of outstanding shares.
