Robinhood's Mixed Bag: 3 Analysts Weigh In Following Q3 Earnings

Robinhood Markets Inc HOOD reported mixed third-quarter financial results this week. Following the report, one analyst took a somewhat bullish stance, one remained neutral and one was negative. Here's a look at what the three analysts had to say about the quarter.

Q3 Earnings: Robinhood reported third-quarter revenue of $467 million, missing the consensus estimate of $478.2 million, according to Benzinga Pro. The company beat earnings estimates, reporting a loss of 9 cents per share versus an expected loss of 10 cents per share.

Monthly active users decreased 16% year-over-year to 10.3 million, but average revenue per user increased 27%. 

Analyst Take: Mizuho analyst Dan Dolev was the most bullish of the trio. He maintained a Buy rating but lowered the price target from $15 to $14, citing soft top-line results. 

"Although HOOD's results fell short of consensus, we see several notable positives," Dolev said in a note to clients.

Mizuho highlighted an uptick in net cumulative accounts and a moderating decline in monthly actives. The analyst also pointed to adjusted operating expense guidance and lower stock based compensation for 2023. 

"We are lowering top-line estimates due to weaker than expected revenues. However, we are raising adjusted EBITDA amid better than expected cost controls," Dolev said. 

Needham analyst John Todaro maintained a Hold rating on Robinhood following the report. He highlighted the current challenging environment for transaction based revenue, as well as competition from the likes of Coinbase Global Inc COIN.

Although the analyst anticipates volume growth in the fourth quarter due to rising cryptocurrency prices, he expressed concerns about the company's recent token de-listings. Todaro suggested that the company could lose customers to Coinbase because of its reduced offerings. 

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The tough market environment also creates a challenging setup for Robinhood heading into the end of the year as the company is largely dependent on equity and options activity, which could continue to slow, he said. 

"We continue to see a challenging environment for transaction based revenue and are sidelined as we see a difficult period for growth moving forward," Todaro said in a note. 

BofA analyst Craig Siegenthaler was the most negative of the group. He maintained an Underperform rating and price target of $9. He expressed a lot of the same concerns as Todaro on the macro front. 

"While HOOD is making efforts to mitigate beta-exposure on its business, its revenues remain highly exposed to movements in the overall market," the BofA analyst said in a note. 

Siegenthaler believes Robinhood will continue to be negatively impacted by overall market conditions and Covid-related tailwind reversals, including back to work and lack of stimulus. 

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HOOD Price Action: Robinhood shares were down 4.3% at $8.00 Thursday afternoon, per Benzinga Pro.

Photo: Paul Barlow from Pixabay.