Blockchain
Robinhood (HOOD) Delivers Big Profits Driven by Crypto Trading Boom: Analysts
This was reported by the trading platform Robinhood (HOOD). strong first quarter earnings yesterday, as a surge in cryptocurrency trading fueled a 40% year-over-year revenue surge, leading some analysts to upgrade their earnings estimates and price targets.
KBW raised its price target to $21.50 from $20, while maintaining its market perform rating. Rival broker JMP raised its price target to $30 from $28 and reiterated its market outperform rating. The shares, which closed yesterday at $17.85, rose more than 4% in early trading Thursday. This year they have gained more than 40%.
“A solid pace in the quarter for us and the consensus as stronger-than-expected crypto trading revenues pushed earnings per share (EPS) higher, with lower expenses contributing a penny to adjusted earnings of $ 0.05 before interest, taxes, depreciation, and amortization (EBITDA) beat,” wrote KBW analysts led by Kyle Voigt.
Revenue from crypto transactions more than tripled compared to the prior-year quarter.
Two other key takeaways were strong customer reception to new products such as the platform’s Gold Card and the expansion of the company’s EBITDA margin, KBW said.
JMP noted that the company “delivered record net new deposits of $11.2 billion (an annualized rate of 44%), including positive net flows from all major dealers, and also 75% of deposits coming from customers who I’ve been on the platform for over a year.”
The popular trading platform added 500,000 new accounts in the quarter, more than in all of last year and the highest quarter for new accounts since the first quarter of 2022, JMP said. The positive momentum continued, with a record $5 billion in deposits in April compared to the monthly average of $3.7 billion in the first quarter, the broker noted.
“We expect further acceleration in deposits and new customers, with an increasing contribution to Gold supply improvements as well,” wrote JMP analysts led by Devin Ryan.
Bernstein said he expects Robinhood to “fight hard against the SEC and not back down on its cryptocurrency business.” Robin Hood received a Wells alert – a preliminary warning from the regulator saying it believes it has sufficient information to take enforcement action – on 4 May.
“We continue to expect continued client traction in cryptocurrency trading as regulatory clarity takes its course,” analysts Gautam Chhugani and Mahika Sapra wrote.