Robinhood Hovers After Investors Ruminate Results

Robinhood (NASDAQ:HOOD) posted Q4 and full year 2022 results yesterday that delivered a net loss of $166 million, or an EPS of -$0.19, compared with net loss of $175 million, or EPS of -$0.20, in the third quarter of 2022. For the full year, Robinhood reported a net loss of $1.03 billion, or an EPS -$1.17 per share. So things are still negative.

Total net revenues for Q4 increased a slight 5% sequentially to $380 million for the full year, and Robinhood reported revenue for the year of $1.36 billion.

Regarding trading, cryptocurrency decreased 24% to $39 million, and equities decreased 32% to $21 million during Q4.

On top of the tepid results, Robinhood reported an “error” that led to a $57 million expense due to a processing mistake. According to the executive team, Cosmos Health enacted a one for 25 reverse split in December, and Robinhood sold shares short in the deal as they scrambled to buy back shares in a rising price environment. Robinhood called the event an outlier, ensuring it would never happen again.

On the positive side, Robinhood reported an increase in net funded accounts in Q4 – an increase of around 50,000, bringing the total to 23 million, sharing that January looks even better as approximately 60,000 accounts were added. Monthly active users declined in December but appear to be bouncing back this quarter.

Net Deposits during the quarter stood at $18.4 billion, generating a growth rate of 19%.

Cash on hand was around $6 billion.

Robinhood said it continues to reduce costs, while reducing shares. The deal with UK-based Fintech Ziglu was terminated – saving $12 million. Robinhood co-founders have decided to cancel nearly $500 million of their share-based compensation. At the same time, Robinhood will purchase 55 million shares affiliated with Sam Bankman-Fried who invested in the investment platform.

The team highlighted its new features, including an IRA product that provides a 1% match – unique in the industry.

The overall question is if all of this is enough to generate more shareholder value.

Shares in Robinhood popped briefly and continue to hover between $10 to $11 a share at a market cap of $8.84 billion. This is a far cry from its IPO price and all time high of over $40. Early investors have experienced a profound value destruction. Most analysts rate it a hold. The company does have a solid bank account which should be sufficient to tough out the challenging environment, but with a regulatory climate that is absolutely anti-innovation and competition rising, you have to wonder how long it will take to turn things around.




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