Robinhood disappoints with users and profit, and credit losses soar 173% in the quarter

Robinhood released lower-than-expected results for the quarter: the number of monthly active users and net profit fell short of projections, which left investors uneasy, according to the Meet Kevin channel. The provision for credit losses jumped from US$26 million to US$71 million, an increase of 173%.

Operating costs also increased, from US$33 million to US$79 million in the quarter, according to the presenter. Part of the increase comes from expenses with the expansion of prediction markets, launched in partnership with Rothera shortly after the World Cup.

The company says Rothera already generates more than $100 million in annual recurring revenue. For the presenter, the number shows that there is a lot of money to be made in these markets. He notes that the partnership allows Robinhood to occupy more than one step of the chain (brokerage, exchange and clearinghouse), without relying on different companies.

Cost discipline did not prevent higher expenses

Chief executive Vlad managed to cut general and administrative expenses by 12% and increased marketing spending by just 2%. Even so, total operating expenses rose 16%. In the presenter's assessment, the company is known for being economical in marketing and has good products that do not require higher expenses.

For him, the likely explanation is the Gold card, with 3% cashback, used as bait to attract customers (the so-called loss leader). He points out that the 10-Q form has not yet been published, which prevents confirming the details, but says that historically this type of card causes losses to the company.

Card users rose from 800,000 in May to 1.3 million. According to the presenter, the strategy would be to boost banking services, trust accounts and retirement accounts. Revenue from trading by artificial intelligence agents, with 200,000 clients, would yield around US$1.6 million at 10 basis points in shares, which he considers to be of little relevance.

Connection with the Bitcoin cycle and valuation

The channel maintains that HOOD shares tend to follow the Bitcoin cycle, as operations with crypto assets are high margin. With the currency fluctuating around US$80,000, after leaving the US$60,000 range, and now slowing down, the stock follows the movement. Crypto revenue fell year-on-year, although it exceeded expectations.

The price/earnings/growth (PEG) ratio is around 2, and the market projects growth of 20% per year, a number that the presenter considers low. He estimates the current discount at 5% to 10%. Trading revenue grew 19% in the year, and prediction markets revenue grew 61%.

The presenter highlights that competition in this segment is strong and that Robinhood may need to invest more in marketing. He said he would expect a lower price, a personal opinion that does not constitute an investment recommendation.

Automatically translated from Portuguese.