More financial trading items have been added to Robinhood’s portfolio.
With the S&P 500 reaching new all-time highs and reporting multiple months of gains, the stock market enjoyed a great third quarter. Additionally, meme-stocks were once again popular, and businesses such as Opendoor Technologies Inc. saw significant profits.
All of this was sufficient to cause individual investors to go into a trading frenzy, which was advantageous for retail brokerage Robinhood Markets Inc. (HOOD).
Late Wednesday saw the release of Robinhood’s third-quarter earnings, which showed a 259% increase in profit per share (61 cents) and sales that quadrupled year over year to $1.27 billion. That exceeded the 56 cents per share earnings on $1.2 billion in sales that Wall Street had predicted.
The platform saw an increase in trading volume for stocks, options, and cryptocurrency. As a result, Robinhood’s transaction-based revenue increased by 129% year over year to $730 million. Crypto’s transaction-based revenue increased at the quickest rate, by over 300% over the course of the year.
According to Robinhood, the overall number of funded consumers increased by 2.5 million during this quarter, reaching 26.8 million. The business emphasized how many consumers were drawn to its new offerings.
Another quarter of “profitable growth” occurred as Robinhood kept expanding its line of business. Chief Financial Officer Jason Warnick noted in a statement that Bitstamp and prediction markets, two new business areas, are bringing in roughly $100 million annually.
Warnick will continue to serve as a strategic adviser until September 1st, but he will retire early next year. Shiv Verma was appointed as the company’s new CFO.
“Prediction markets are really on fire,” stated Vlad Tenev, CEO of Robinhood, during the company’s earnings call. “It’s unbelievable that we only started this with the presidential election market around a year ago. Since then, our volume has doubled every quarter.
In the third quarter, Robinhood handled 2.3 billion prediction-market contracts, and in October, another 2.5 billion contracts were traded, according to Tenev. This suggests that the fourth quarter may see even more exponential growth.
Of its business lines, Robinhood’s prediction-markets offering reached $100 million in yearly revenue the quickest, according to Warnick. The corporation currently has 11 business lines that bring in at least $100 million a year.
“That’s wild diversification in motion,” Zacks Investment Research stock researcher David Bartosiak said of Robinhood’s various business ventures. “Vlad and crew are turning Robinhood into the Swiss Army knife of finance with trading, banking, crypto, even prediction markets.”
After-hours trading saw a 2% decline in shares despite the beat. Over the last three months, Robinhood’s stock has increased by more than 35% as investors’ confidence in the business has grown following the company’s impressive second-quarter earnings. However, following a noteworthy run, several analysts are worried about the company’s lofty value.
The senior client portfolio manager at Zacks Investment Management, Brian Mulberry, stated in an email that “investors are concerned about the sustainability of peak growth rates and high valuations.” “Overall, this quarter will help bolster the return to profitability but 100% growth rates are difficult to sustain for long periods.”
