Robinhood Shares Down 15% After $423M Net Loss in Q4 2021

Brokerage firm Robinhood recently released its earnings results for the latest quarter of 2021. The company reported a net loss of 49 cents per share or a total of $423 million. The firm also anticipates a sharp decline in its Q1 2022 revenue, at least by 35% compared to 2021. 

Following the news, shares of the brokerage firm plunged by as much as 15% in after-hours trading.

Robinhood’s Q4 Numbers Below Estimations

Robinhood reported a net loss of $423 million for the last quarter of 2021, or a loss of 49 cents per share, which beat the 45 cent loss estimation. Its revenue for the quarter increased to $363 million, a 14% rise compared with $318 million in Q4 2020. However, considering that the firm was not public back in 2020, this slight increase in revenue is not impressive. 

The broker’s net cumulative funded accounts grew to 22.7 million by the end of 2021, which represents an 81% increase compared to 12.5 million in late 2020. This means that Robinhood has added more than 10 million accounts in 2021 alone, nearly doubling its user base. 

However, the company expects to earn $340 million in Q1 2022, considerably less than Wall Street’s estimation of $448.2 million. Robinhood has also experienced a decline in the number of active users. The company’s monthly active users fell to 17.3 million from the third quarter’s 18.9 million. This figure was also below the estimated 19.8 million.

Meanwhile, Robinhood’s transaction-based revenues in the last quarter of 2021 reached $264 million, increasing by 12% year-over-year. However, this figure is slightly lower than its transaction-based revenues in Q3 2021, when it raked in $267 million. 

Following the reporting, Robinhood’s stock dropped by 15% in after-hours trading. At the time of writing, shares of the stock trading app are down by approximately 85% compared to its all-time high. This month alone, HOOD has dropped by more than 30%, bringing its market capitalization to just over $9.7 billion. 

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Robinhood to Focus On Crypto in Q1 2022

In the latest quarter of 2021, crypto made up $48 million of Robinhood’s transaction-based revenue, a 304% increase year-over-year. However, this figure is lower than the company’s crypto revenue in other quarters of the year. More specifically, the company made $88 million, $233 million, and $51 million in transaction-based revenue in Q1, Q2, and Q3 2021, respectively. 

As reported, the company generated significant revenue from digital assets particularly in the second quarter of 2021. At the time, the $233 million in revenue from cryptocurrencies nearly accounted for 50% of its entire revenue. 

Now, in a bid to once again increase its crypto revenue and lure crypto traders, Robinhood aims to release its crypto wallet and even launch a crypto platform. In its earnings report, the brokerage firm said:

“Robinhood has set aggressive goals to start opening its crypto platform up to customers internationally in 2022. The company believes in the immense potential of the crypto economy and sees a big opportunity in serving customers across the globe.”

What Does the Future Hold For Robinhood?

Robinhood started its brokerage business with the mission to “provide everyone with access to the financial markets, not just the wealthy.” The firm claimed that it aims to “democratize investing,” and offered a sleek app with commission-free trades, which lured a swarm of new investors. 

However, when the brokerage firm restricted trading on select stocks such as GME and AMC in 2021, it received massive backlash from retail traders. Even in mid-April, when DOGE rallied 132% in a day, Robinhood halted trades and didn’t give traders the opportunity to cash in.

Following these incidents, Robinhood has arguably become an undependable brokerage firm, which partly describes why its customer base has been in decline recently. Still, it remains to be seen if Robinhood can once again lure traders with its yet-to-be-launched crypto platform and wallet. 

What do you think the future holds for Robinhood? Let us know in the comments below.