In early trading on Thursday, Robinhood (HOOD) shares saw a notable leap after the trading platform unveiled fourth-quarter earnings that outpaced Wall Street’s predictions, largely thanks to a remarkable upswing in cryptocurrency-related income.
Wall Street giant JPMorgan (JPM) highlighted in its Wednesday research note that the firm pulled in an impressive $358 million from crypto transactions during the quarter — marking the highest-ever haul from its digital asset trading segment.
Market Reactions and Analyst Upgrades
Following the earnings release, which came after Wednesday’s market close, the stock surged 13%, hitting $63.20 in early Thursday trades. Meanwhile, brokerage firms swiftly adjusted their outlooks:
- JPMorgan nudged its price target up to $45 from $39, keeping a neutral stance.
- Citi lifted its target sharply to $60 from $45, though maintaining a cautious view.
- Bernstein more than doubled its forecast to $105 from $51, reaffirming an outperform rating.
Robust Revenue Growth and Crypto’s Expanding Role
Robinhood’s revenue soared by 115% year-over-year to reach $1.01 billion in Q4, comfortably beating the consensus estimate of $945.8 million, according to FactSet. Earnings tied to transactions rocketed by 200%, propelled predominantly by a staggering 700% surge in crypto revenue.
Typically, crypto accounts for roughly 10% to 20% of the company’s total top line, JPMorgan pointed out. A 46% rise in the overall cryptocurrency market capitalization during the period and a whopping 393% quarter-over-quarter jump in Robinhood’s notional crypto trading volumes were key drivers behind the financial upside.
Quick Crypto Facts
Between October and December, the total market cap of cryptocurrencies climbed by nearly half, reinforcing Robinhood’s position amidst a rapidly growing digital asset ecosystem. The platform’s trading volume in crypto skyrocketed almost fourfold compared to the previous quarter, reflecting heightened user engagement and market volatility.
Strategic Moves in Crypto Expansion
The company is gearing up to broaden its crypto offering, with management outlining ambitions to:
- Introduce additional cryptocurrencies to its platform;
- Enhance its digital wallet capabilities;
- Implement an order book with advanced exchange routing;
- Integrate with Bitstamp;
- Explore tokenization strategies for future growth.
Outlook and Market Sentiment
Citi emphasized that Robinhood has thrived on favorable conditions since the start of the year, buoyed by “strong retail investor interest and tailwinds from the crypto market.”
Nonetheless, the bank cautioned that investors should brace for fluctuations despite the optimistic tone, recommending a watchful wait for a “more attractive entry point” despite improvements in the company’s fundamental prospects.
Bernstein echoed this positive sentiment, dubbing Robinhood the top pick within its global digital assets coverage. The brokerage anticipates sustained momentum in the upcoming quarter, fueled by ongoing crypto market unrest and a persistent price cycle.