Robinhood stock soars on Q4 earnings beat, crypto trading rises 10% year-over-year

Robinhood (HOOD) soars higher after beating Wall Street expectations on the top and bottom lines in its fourth-quarter earnings, posting $471 million in revenue versus an expected $457 million, and adjusted earnings per share of $0.03 versus an expected loss of $0.01. While the trading platform’s monthly active users fell 4% for the quarter, other metrics like crypto trading rose 10% year-over-year, which brought in $43 million in revenue for the company.
Needham & Company Senior Research Analyst John Tadaro joins Yahoo Finance anchor Rachelle Akuffo to discuss Robinhood’s performance and the influx of crypto trading that boosted revenue.
Tadaro puts crypto trading in perspective for the company:
“2024, most of the growth we see, we do have coming from crypto. Crypto came in very strong in December and primarily made that beat in Q4 there. So, if it weren’t for crypto, the transactional activity wouldn’t have beat. So, we do see that as a growing segment. It’s coming off a very low baseline, so crypto volumes obviously plummeted a lot last year, so you’re seeing kind of a snapback that’s really propelling the growth. For equities options, that growth is a little bit more moderated, it’s a more mature business for Robinhood, so we do see crypto as kind of the growth component for Robinhood. That being said, what we would like to see is Robinhood come out and offer more crypto products.”
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Well speaking of shares of Robin Hood moving to the upside this morning after posting a surprise beat on profit the stock trading platform reported adjusted earnings per share of three cents in the fourth quarter versus an an expected loss of one cent a share Revenue also beating Robin Hood seeing

Transaction-based Revenue climb higher driven primarily by crypto trading more on the results we turn to John Todaro nidm and Company senior research analyst good to have you on the show here so walk us through some of the expectations that we have for Robin Hood especially when you think about coinbase and that

Sort of that hustle for for getting that spot Bitcoin ETF proposal yeah sure so Robin Hood’s actually in in kind of a sweet spot where they also trade Equity so when you have these Bitcoin ETF Launches on I believe it was the first day that was launched Robin Hood added those to the

Platform so they can trade the ETFs or they can trade um the spot Bitcoin what I think the concern was for a lot of investors was do the Bitcoin ETFs cannibalize the Bitcoin trade trading business um and that concern is not only for Robin Hood but coinbase on the

Earnings call um that’s not what played out Robinhood management said that the Bitcoin ETF was additive to their Bitcoin trading business that you didn’t see the ETFs kind of take share away from their direct buying and trading of uh Bitcoin on the platform yeah John looking at some of the transaction based

Revenues I mean cryptocurrency that was um almost double the revenue that equities trading Revenue saw here where you saw the growth there move Higher by about uh 10% well increased 8% year-over-year primarily driven by cryptocurrencies they mentioned that was up 10% equity’s Revenue was up as well

Here and so ultimately bringing in more revenue on the cryptocurrency front how annexed is Robin Hood’s future growth profile to the broader crypto landscape and and the ability for more users to be able to buy and trade or even just hodal yeah so 2020 24 most of the growth

We see we do have coming from crypto crypto came in very strong in December and and primarily made that that beat in uh Q4 there so uh if it weren’t for crypto uh the transactional activity wouldn’t have beat so we do see that as kind of a growing segment it’s coming

Off a very low Baseline so crypto volumes obviously plummeted a lot last year so you’re seeing kind of a snapback that’s really propelling the growth or equities options that growth is a little bit more moderated it’s more mature business for Robin Hood um so we do see

Crypto as kind of the growth component for Robin Hood that being said um what we would like to see is Robin Hood come out and offer more crypto products they they’ve done a good job they’ve added in metamask integration but they still offer a lot fewer crypto assets for

Trading versus a platform like coinbase or some of the other crypto native exchanges if you will um but that being said Robin Hood has moved into uh Europe now and so they’re trying to grow that cryp cryto presence internationally the thinking being regulation still a little

Bit tight in the US um and so that that business they’re they’re kind of keeping a little bit of a a lid on it almost and John also on the call they talked about focusing on driving net deposits even higher by improving the user experience and the value proposition how do they get

There yeah you know that’s so they have taken share from other brok Bridges um so that has been a positive for us if they can continue to to grow that component um we we wouldn’t we do notice that the the platform has improved quite a bit for that traditional kind of

Equity brokerage business um so it’s it’s that’s a little bit more of a a slugging match you have to take market share there’s not necessarily a ton of new uh assets coming in uh so it’s a little bit more of a market share battle there versus that that crypto component

Where you can just benefit by more uh retail investors moving into that landscape so that one we do see is a little bit more moderated moving forward gaining in terms of market share but also the monthly active users that that actually was down 4% year-over-year what

Type of uh kind of strategic play do you believe that Robin Still Still Robin Hood still has to deploy in order to make sure that they’re they’re building out that number and seeing growth reinitiated yes they’ve done a few product launches to try and uh increase that monthly active participation so

They rolled out 24-hour stock trading uh I believe it’s now up to 900 tickers that they offer 24-hour stock trading um so they have rolled out a number of products to try and get that increasing active user participation uh what I would say is you know if you look back

To 2021 and 2022 uh at least the early part of 22 it was a very different environment even though stocks are kind of getting or back around all-time highs uh that retail activity in the marketplace is still not what you saw in 2021 so when you do look back a year or

Or two years um it is it’s a tough comp so to speak so you know they have been improving Maus um but to get back to 2021 levels if if that’s what we’re looking at I do think you’re going to need to see a lot greater retail participation not only in crypto but

Also in stocks what type of inflows are you expecting or anticipating if we do see the FED move up and it’s it’s rates cutting perspecti this or pathway I mean especially considering we saw just yesterday what the reality of the number of Traders or the number of investors

That are willing to step away from certain portfolio plays If the Fed looks like they’re going to just stay higher for longer and actually push out that rate cutting cycle even further yeah so if if rates stay higher for longer we do think that negatively impacts the trading business Robin Hood

Coinbase all of these so not only would that likely weigh on crypto prices and maybe even stock prices um but it also especially on Robin Hood folks might sit in cash longer they’re earning you know you know call it 5% or so on the Robin Hood platform so instead of

Putting those assets to work and trading they might just just continue to clip that yield um so we do you know Robin Hood’s a little bit of a hedge business where you do have the interest income component of Robin Hood where higher rates that benefits that business but then higher rates negatively impacts

Impacts the transactional revenue um so it’s it’s a bit hedge but what I would say is overall Robin Hood coinbase they’re going to benefit more by getting rate Cuts so uh you do see cut start to happen sooner I think that’s good for crypto prices likely good for most

Equity prices and then also good for just the participation in training activity especially on the retail side so while that business is a bit hedged I would say rate Cuts sooner than expected better for Robin and John we know that uh Bitcoin Enthusiast or crypto enthusiasts always looking for that next

Catalyst we know we’re supposed to get the Bitcoin harving coming up in April how does that translate though into the inflows that that coin and Hood tend to see when they have this sort of rush and a lift in the price of crypto yeah sure so the the ETFs have so

Far been been kind of a net win we’ve seen continuous net inflows the one outflow was the grayscale gbtc product a lot of that selling has slowed down so now we’re on a trajectory where you’re you’re just getting kind of day over day these net inflows to the the Bitcoin

ETFs uh what happens there is folks can either trade the Bitcoin ETFs on Robin Hood so that’s a benefit for Robin Hood and then on coinbase the institutional flows into these ETFs a lot of the ETFs are transacting via coinbase so those institutional volumes are going uh through the coinbase platform if you

Will um so overall net positive we think pushing Bitcoin past 50k has been in part due to these Bitcoin ETFs um so we do view them overall as a positive for Bitcoin there was a little bit of a buy the rumor sell the news when the ETFs

First came about uh but now we’re kind of seeing those net inflows just continue to pick up so that was a positive Catalyst the next one is the having it shouldn’t be much of a surprise right having everyone knows happens every four years so you would

Think the market bakes in some of this um but what the market might be missing is just kind of that daily demand that’s going to outstrip the Daily new Supply that comes out after the having because there’s a supply crunch um and that can start to get things going a bit more um

After that the next Catalyst for the space would be as you guys mentioned earlier whether get an ethereum ETF and I believe the first deadline for that is in May with the SEC looking forward to seeing how that plays out obviously if a bit of a different animal here from a

Traditional token uh like a Bitcoin appreciate you taking the time John tadar thank you so much thanks for having me