Robinhood Reports Earnings on Wednesday. Here’s What Could Move the Stock.

2 months ago 19
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Irina Velichkina/Dreamstime.com

Robinhood Markets volition merchandise its second-quarter net aft the marketplace closes connected Wednesday, but the numbers are improbable to matter. 

There are 2 reasons for that. The main 1 is that Robinhood (ticker: HOOD) already previewed the report, and said however galore caller customers it had added. So the stock’s biggest selling constituent — that the institution is adding users acold faster than different brokers — is already baked into the banal price. Robinhood said it had 22.5 cardinal funded accounts astatine the extremity of the 2nd quarter, up from 18 cardinal astatine the extremity of the archetypal and 12.5 cardinal astatine the commencement of the year.

The company’s projections made it wide that Robinhood was unprofitable successful the 2nd quarter, losing betwixt $487 cardinal and $537 cardinal connected $546 cardinal to $574 cardinal successful revenue. Robinhood besides said that equities trading connected its app dropped year-over-year, a troubling motion for a institution that depends connected trading for astir of its revenue.

The different crushed that investors whitethorn place the company’s second-quarter fiscal details is that the banal is present trading connected sentiment and momentum. Robinhood has soared and crashed connected precise small quality since it started trading connected July 29.

The banal is successful the mediate of a tug of warfare betwixt bears and bulls. And arsenic the meme banal mania has made clear, stocks that are portion of that propulsion and propulsion don’t respond successful a predictable mode to quality astir dollars and cents.

Robinhood banal fell connected its archetypal time of trading, but rocketed higher the pursuing week connected small news. It has since traded with precocious volatility, and attracted tons of enactment successful the options market. On Monday, the banal closed down 6.8%, to $47.19.

All that said, the net study could inactive determination the stock, peculiarly if the institution issues guidance for the 3rd and 4th quarters. Robinhood projected past period that third-quarter gross would beryllium beneath second-quarter revenue, successful portion due to the fact that of an expected slowdown successful cryptocurrency trading. But it volition beryllium absorbing to spot if the caller rebound successful cryptocurrency prices has led much radical to commercialized crypto connected Robinhood. 

And the company’s post-earnings league call, scheduled for 5 p.m. Eastern time, could besides beryllium intriguing. Robinhood is letting “little guy” investors dictate the questions by submitting them done an app called Say Technologies that Robinhood conscionable agreed to bargain for $140 million. The institution volition find what questions get asked based connected however galore votes those questions person connected the app. In that way, it’s akin to Reddit upvotes, a scoring strategy that galore younger investors are acquainted with.

The question that presently has the astir votes connected the app is “Will Robinhood wage retired a dividend successful the future?” The institution answered that question successful its prospectus by saying “we bash not expect declaring oregon paying immoderate currency dividends successful the foreseeable future.”

The 2nd most-upvoted question is “Is Robinhood getting a crypto wallet?” Right now, Robinhood users don’t person their ain integer wallets for crypto that would let them to transportation those funds retired of the app. CEO Vlad Tenev said successful March that Robinhood was moving to get users that enactment “as accelerated arsenic possible.” 

The 3rd astir fashionable question is “What are Robinhood’s plans for IRA, 401(k), and HSA accounts? Are immoderate (or all) of them a anticipation for the future, and—if yes—how soon?” That is going to beryllium a cardinal question for the company. Robinhood’s competitors similar Fidelity and Charles Schwab (SCHW) person a caput commencement successful offering those kinds of services, and if Robinhood tin person its customers to besides unfastened those kinds of accounts it would propulsion backmost against 1 cardinal critique of the institution — that its gross watercourse is based excessively overmuch connected precocious trading volumes.

It is not wide however galore questions Robinhood volition allow. If it allows several, it could get immoderate peculiarly unsocial ones.

Currently the fifth-most fashionable question is “as archetypal investor, tin we get a robinhood chapeau and hoody jacket”?

And the 19th most-popular question is astir 1 of the astir arguable episodes successful Robinhood’s past — erstwhile it halted buying of fashionable stocks similar GameStop (GME) successful precocious January. “What measures bash you person successful spot to NOT halt trading erstwhile GameStop benignant situations originate successful future? It is NOT democratizing concern for all, erstwhile it is not a level playing field,” the questioner asked.

Write to Avi Salzman astatine avi.salzman@barrons.com

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