Robinhood Markets Inc. (HOOD) stock cratered yesterday after the company badly missed first-quarter estimates. But the disappointment shouldn't have been a surprise, writes Keith Fitz-Gerald, editor of 5 With Fitz.
Transaction revenue came in at $623 million against expectations of $728 million. Crypto revenue? Try down 47% year-over-year to $134 million.
Robinhood built its entire brand on getting retail investors excited – first with “free” trades that were never actually free – something we’ve talked about so many times. Then it strapped itself to the crypto rocket.
Robinhood Markets Inc. (HOOD)
Here's the thing: Bitcoin is off 30%-plus in six months, and the crypto crew who thought it was “easy money” are now finding out the hard way that it isn’t. Many have left the game entirely because they can’t hack it or simply got flambéed by Wall Street’s bigger, more liquid go-fast crew.
So, now what? Charles Schwab Corp. (SCHW), E*TRADE, and crypto-native exchanges are all fighting for the same shrinking pool of retail volume. That means Robinhood is going to have to A) reinvent itself again or B) stop with the gamification of trading and get serious.
And the problem? History suggests that you don’t reinvent a company between earnings calls.
Since Robinhood’s all-time high last October, HOOD is down roughly 50%. Meanwhile one of my faves – a massive (some say lumbering) dinosaur that serious investors supposedly avoid – is up about 4% over the same stretch. It has also quietly paid dividends the whole time.
Exciting vs. boring. Minus-50% vs. plus-4%. You tell me which one belongs in your portfolio. I know which one belongs in mine.
