Home News Falling asset prices could deepen Robinhood’s Q1 losses, although interest income rises

Falling asset prices could deepen Robinhood’s Q1 losses, although interest income rises

by SuperiorInvest

Robinhood Markets Inc. (HOOD), among the largest online brokers by assets under management, is poised to post its ninth straight quarter of net losses in the first quarter of 2023 as cryptocurrency trading remains weak even as net interest income rises.

Key things

  • Robinhood likely lost $484 million, or 62 cents per share, in the first quarter of 2023.
  • Total revenues could increase 43% year-over-year to $428 million, supporting a 253% increase in net interest income.
  • Monthly active users likely fell by a quarter to 12 million as the stock rally faltered and cryptocurrency activity remained muted.

Robinhood is expected to post a loss of more than $484 million for the quarter, up nearly 25% from the same quarter a year ago, according to analyst estimates compiled by Visible Alpha. Diluted profit per share (EPS) is estimated at $-0.62 compared to $-0.45 in the prior year quarter.

Operating costs are expected to increase by 43% over last year. Most of this increase could stem from the near-doubling General and administrative expenses which are expected to contract during this year. However, higher costs could completely offset the projected 43% increase in revenue.

Robinhood reports results after markets close on Wednesday, May 10.

Robinhood’s results could underscore the strangeness of the retail trading frenzy that quadrupled the brokerage’s revenue between the first quarters of 2020 and 2021. Transaction volume is expected to remain flat last quarter after falling for four consecutive quarters, while monthly active users of the platform are forecast to continue to decline by nearly 25%.

Rising interest rates have hurt asset values, but allow Robinhood to charge more interest on margins and other loans. Net interest income is expected to more than triple to $194 million for the quarter.

A rise in interest rates could present a new opportunity for Robinhood as it pursues savers with its Robinhood Gold subscription service. Gold subscribers earn higher returns on uninvested cash he swept from their brokerage account to partner banks.

Robinhood shares have lost nearly a quarter of their value over the past year, while the benchmark S&P 500 Financials Sector Index has fallen 13%.

Source: TradingView.

Robinhood Key Statistics
Estimate for Q1 FY2023 Current for Q1 FY2022 Current for Q1 FY2021
Adjusted earnings per share ($) -0.62 -0.45 -6.26
Revenue (million USD) 428.2 299.0 522.2
Active users per month (M) 12.0 15.9 17.7

Source: Visible Alpha

Key metric: Active users per month

Robinhood counts as monthly active users (MAU) any individual who makes a debit card transaction, switches between two screens on a mobile device, or loads a web page while logged into their account at any time during the calendar month. In order to be counted as a monthly active user, the client does not have to have a fund account or be active in the following months.

Robinhood’s MAUs are expected to drop by a quarter to 12 million in the first three months of the year. That would be the company’s second lowest quarterly MAU count since 2020.

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