Robinhood Markets warned investors Wednesday that a revenue surge in the second quarter, fueled by a boom in cryptocurrency trading, might not last.
In its first earnings report as a publicly traded company, the brokerage said that revenue more than doubled to $ 565 million, but that a significant portion of that was driven by virtual currencies, primarily Dogecoin, a token that originated As a joke.
Shares of Menlo Park, California-based Robinhood fell 8.2% to $ 45.70 in extended trading at 6:35 p.m. in New York, after rising 31% from its initial public offering on 29. of July.
“We expect seasonal headwinds and lower business activity in the industry to result in lower revenue and significantly fewer new accounts funded” in the third quarter, Robinhood said in a statement.
Crypto revenue totaled $ 233 million in the second quarter, 4.560% more than the previous year, underscoring how the ever-changing preferences of retail merchants play a crucial role in the amount of revenue the company generates. That figure exceeded income from trading stocks and options combined. Dogecoin accounted for 62% of crypto revenue in the period.
After reporting the results, Robinhood executives answered questions from retail investors during a conference call, a role normally reserved for Wall Street analysts. Earlier this month, Robinhood bought Say Technologies, a software provider that allows individual investors to submit questions to management.
One person asked if they could have Robinhood branded hats and sweatshirts. Another wanted to know if Robinhood will provide crypto wallets, which allow users to send and receive virtual currencies without first converting them to dollars.
“It’s something our teams are working on,” CEO Vlad Tenev said, adding that they are in particular demand among Dogecoin enthusiasts. “The ability to deposit and withdraw cryptocurrencies is difficult to do with scale, and we want to make sure it is done correctly and correctly.”
Robinhood is also weighing whether it would make sense to add social media features to its app, Tenev said in response to another query.
The executives also said that Robinhood will explore whether it will allow users to give shares as gifts, make more cryptocurrencies available for trade, and offer retirement accounts.
Robinhood’s $ 502 million loss in the second quarter, which was on the lower end of a previous forecast, compares with a $ 58 million profit in the second quarter of last year, when retail investors returned to plunging into stocks after a pandemic-fueled slide.
What Bloomberg Intelligence says:
“The pressure is on for Robinhood to invest in crypto trading products, including additional crypto wallet functionality and more coins to buy and trade, after strong user interest reflected in the second quarter results. But this could mean margin pressure for 2H while revenue visibility worsens. “
– Julie Chariell, BI fintech industry analyst
The rise in crypto revenue also reflects an increased investor appetite for virtual currencies this year. More than 60% of Robinhood accounts traded cryptocurrencies in the second quarter. Bitcoin hit all-time highs in April and held above $ 34,500 at the end of June. The price was closer to $ 9,000 around the same time last year.
Robinhood’s financed accounts reached 22.5 million clients as of June 30, compared with 9.8 million a year earlier, according to the statement.
© 2021 Bloomberg