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Robinhood is poised for a strong Q1 as market rebound boosts trading activity.
Robinhood Markets, the trading app known for its commission-free trading and role in the 2021 meme stock frenzy, is expected to report its highest quarterly revenue in nearly three years, driven by a steady rebound in equity markets and crypto trading.
According to an initial report from Reuters, there has been a resurgence in global markets fueled by bets on interest rate cuts, has attracted traders back to the platform, resulting in higher transaction-based revenue for the retail investor-focused brokerage.
Robinhood’s shares have surged 58% in the first three months of the year, marking the sharpest quarterly stock increase since its listing.
According to research firm Apptopia, Robinhood’s daily active users jumped 65% in March compared to the previous year, while total new mobile app downloads soared 94% during the same period. The company’s net interest revenue, the biggest driver of its top line, is expected to rise 24% to $258.24 billion in the first quarter, as reported by LSEG data.
Robinhood’s assets under custody (AUC) exceeded $100 billion for the second consecutive month in February, and the company reported a surprise profit in the final quarter of 2023, setting its sights on profitable growth in 2024. Analysts from JP Morgan forecast a 24% increase in revenue to $548.61 million for the first quarter, with crypto trading revenue likely to more than double from the previous year to $80 million.
Despite the positive outlook, the average recommendation of 17 brokerages covering Robinhood remains a “hold.” The median price target for the company is $19, a 65% increase from three months ago. Robinhood currently trades at 64.01 times its forward earnings estimate, significantly higher than the industry median of 10.97. Although the stock hit a more than two-year high in late March, it has lost more than half its value since its July 2021 market debut.
The projection comes as Robinhood faces pressure from the SEC for alleged violations of securities laws. Robinhood will release its Q1 results Wednesday.
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