Revenues plummeted

Shares of Robinhood (HOOD) fell after the online broker reported earnings below market analysts' forecasts as cryptocurrency trading volumes on the company's platform dropped sharply. Robinhood said this could happen again in Q4.

Shares of Robinhood (HOOD), up 13.6% in the 4 months since its IPO, plummeted 9.65% Tuesday after the close.

Robinhood's report

Robinhood reported a Q3 2021 loss per share (ended Sept. 30) of -$2.06, worse than the -$1.37 loss per share forecast by market analysts.

The total loss for the quarter was $1.32 billion.

Robinhood's total quarterly revenues were up 35% from last year to $365 million, but down sharply from $565 million in the second quarter. Wall Street analysts on average had forecast a figure of $431.5 million.

The company lost customers in Q3, posting 22.4 million accounts, down from 22.5 million in the second quarter. The number of monthly active users fell to 18.9 million, down from 21.3 million in the second quarter.

Average revenue per user dropped 36% to $65, down from $102 a year ago.

Reasons for the drop in revenue

Robinhood's revenue from options trading transactions on the platform was $164 million and $50 million from stock trading.

The main reason for the sharp drop in revenue was the decline in cryptocurrency transactions on the company's platform in the third quarter.

On August 31, the chairman of the Securities and Exchange Commission (SEC) Gary Gensler said that such practices could be prohibited, the final legislative decision has not yet been made.

In 2021, Robinhood was ranked among the top online stockbrokers by mobile trading platforms/apps.

Robinhood's revenue from cryptocurrency trading on the platform was $51 million, while in the previous quarter the figure was four times higher: $233 million, then the company noted interest in the new cryptocurrency dogecoin and mem shares.

Robinhood Forecast

The company said it expects fourth-quarter revenue of no more than $325 million.

However, the company continues to add new products, such as a crypto wallet, a service for storing and settling cryptocurrency.

"If this quarter is a hint at what Robinhood's results might be in a volatile market, I expect Wall Street analysts' sentiment and estimates about Robinhood stock to fall," Michael Bailey, an analyst at FBB Capital Partners, said in a note to clients.