Robinhood Stock Falls As Q3 Guidance Disappoints
Shares of Robinhood Markets found themselves under strong pressure after the company reported its quarterly results. The company reported that its revenues increased from $244 million in Q2 2020 to $565 million in Q2 2021.
Robinhood’s net loss was $502 million, or $2.16 per share in the second quarter of this year. The loss was driven by a $528 million change in fair value of convertible notes and warrant liability.
Robinhood reported that monthly active users grew to 21.3 million in Q2 2021 compared to 10.2 million in Q1 2020. The growth was especially strong in the crypto segment, as transaction-based revenues in cryptocurrencies grew from just $5 million in Q2 2020 to $233 million in Q2 2021. It should be noted that more than 60% of cryptocurrency revenue is related to Dogecoin, which makes Robinhood sensitive to the dynamics of this meme cryptocurrency.
In the third quarter, the company expects “seasonal headwinds and lower trading activity across the industry to result in lower revenues and considerably fewer new funded accounts than in the prior quarter”.
Robinhood also stated that it would record a one-time cumulative charge of $1 billion in stock-based compensation for restricted stock units related to the IPO.
What’s Next For Robinhood Stock?
Shares of Robinhood reached highs at $85.00 soon after the IPO as traders rushed to buy a “meme” stock. However, the stock quickly lost momentum and is currently trying to settle below the $45 level.
With a market capitalization of more than $35 billion, Robinhood needs to show strong growth to keep the momentum alive. In this light, it is not surprising to see that the stock found itself under pressure after the company indicated that revenues would decline in the third quarter.
Meanwhile, the general market is worried about the upcoming reduction of Fed’s asset purchase program, which is bearish for riskier assets. In this environment, Robinhood stock may gain additional downside momentum in the upcoming trading sessions as the company failed to provide material upside catalysts in the second-quarter report.
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