Wednesday was not a fun day to invest in Robinhood Markets (HOOD). The trading platform’s share fell around 10% on the back of a disappointing third quarter impression, driven by a sharp sequential decline in cryptocurrency transactions. Specifically, crypto trading revenue fell 78% from $ 233 million in the second quarter to $ 51 million in the third quarter.
In total, the company had revenue of $ 365 million, up 35% year-over-year, but $ 72.55 million below the consensus estimate. The company reported a loss of $ 2.06 per share, worse than the loss of $ 1.37 per share that Wall Street had claimed.
Things shouldn’t get better either, with the company predicting fourth-quarter revenue to not exceed $ 325 million; the street was expecting about ~ $ 498 million.
If that weren’t enough to disappoint, foreclosure expirations for early investors are kicking in, with nearly 49 million shares eligible for resale on October 28, with the remaining 50% about to hit the market. November 10.
Accordingly, based on this factor in addition to a planned downward revision of consensus revenue estimates to better reflect HOOD’s guidance for the fourth quarter, the Rosenblatt analyst Sean Horgan expects the headline to “face short-term pressures.”
However, all is not pessimistic. The company’s recently launched crypto wallet currently has over one million people on the waiting list, and crypto activity improving during the quarter along with several new and potential product launches, such as the early direct deposit, retirement accounts, crypto rewards “can provide some compensation for downward pressure. In addition, the “low bar” set for the fourth quarter could potentially work in favor of investors.
“Net / net,” Horgan summed up, “The short-term setup is volatile (starting with an unlock on 10/28) but the long-term setup towards the end of the year indicates a possible inflection point for the stock, in our view. “
To that end, Horgan reiterated a buy note on HOOD shares, along with a price target of $ 50. There is room for a 41% rise from current levels, the analyst said. (To look at Horgan’s track record, Click here)
As expected, there were plenty of analyst revisions on the street after the third quarter print; currently the stock has a moderate buy consensus rating based on 8 buys vs. 5 takes and 1 sell. The average price target is $ 50.08, virtually the same as Horgan’s target. (See the analysis of HOOD shares on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the analyst presented. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.