Robinhood slides as Q1 numbers are scrutinized
While Robinhood beat on the top and bottom lines, operating earnings were softer than expected and expenses a bit higher, analysts wrote.
Robinhood Markets shares fell in early trading Thursday as analysts dug into its earnings results yesterday — which beat on the top and bottom lines — and found some weak spots.
(Full disclosure: Sherwood Media is an editorially independent subsidiary of Robinhood Markets Inc. I own Robinhood stock as part of my compensation.)
Some noted that a key measure of the fundamental earnings power of the business — adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA — was slightly under expectations at $470 million, driven by higher expenses.
“Expenses came in heavier than previously modeled,” JPMorgan’s Ken Worthington wrote. He added, “As such, we view the earnings beat as somewhat low quality since it was driven mostly by a lower-than-modeled effective tax rate.” Worthington kept a “neutral” rating on the stock, but raised his price target to $47 from $44.
Analysts at Barclays also commented on the softer-than-expected EBITDA figure, but suggested that the stock moved more on the commentary company officials offered on April trading activity.
“The real focus of the call was on April metrics: except perhaps for crypto, which remains weak broadly (and with HOOD underperforming a bit relative to global market volumes), equities and options were at or near all-time highs for HOOD,” wrote Barclays analyst Benjamin Budish, who kept his “overweight” rating on the stock and raised his price target to $57 a share from $45.
Meanwhile, Morgan Stanley’s analyst covering the stock, Michael Cyprys, maintained his “equal weight” assessment on Robinhood with a price target of $40, noting that volatility induced by a highly uncertain global economic backdrop could dampen animal spirits among retail traders.
“While we’re long-term bulls, we’re equal-weight on a twelve-month view as we see elevated market volatility and an uncertain macro that could weigh on retail activity in the months ahead and limit scope for earnings upgrades,” he wrote.
