Robinhood’s stock market debut in July 2021 was phenomenal: a furious price rally was observed in the first few days of trading. But then disillusionment quickly set in. As a result of many weak quarterly reports, investors threw their Robinhood securities out of their portfolios – but not all market participants share this pessimism, as has recently been impressively shown.
• Robinhood disappoints analysts and investors with weak sales performance
• Despite job cuts, Robinhood plans to expand into Europe
• Cathie Wood takes advantage of price weakness and stocks up on Robinhood securities
Robinhood’s chart image is an absolute horror even for hardened stock market traders. While the US neo-broker’s share hit a record high of $85.00 a few days after the initial public offering (IPO) on the NASDAQ technology exchange on August 4, 2021, the share price is now down after a two-year decline worth a fraction of that. Even this year’s attempt at stabilization did not last long. In the past three months, the Robinhood stock, which currently costs $8.50 (as of the closing price on November 14th), has fallen by another 18.35 percent.
Robinhood’s disappointing sales performance
The reason for the renewed price slide was the weak quarterly report for the third quarter of 2023. Robinhood recorded $467 million in sales between June and September. Although that was at least more than in the same quarter of the previous year (US$361 million), the US$479.5 million that analysts had expected before the figures were presented could not be achieved.
Profit development was also weak. Robinhood made a profit of $0.10 per share in the last quarter. In the same quarter last year, however, the profit was still at $0.20. Investors apparently couldn’t be comforted by the fact that the earnings estimates of analysts, who had even expected a loss of $0.10 per share, were exceeded. At the end of the trading day following the quarterly report, on November 8th, Robinhood shares ended trading on the NASDAQ with a discount of 4.29 percent to $8.37.
Neobroker boom seems to have passed
The last quarterly report made it clear that Robinhood is still in a deep crisis. Neobrokers, which experienced a veritable boom, particularly in the wake of the COVID-19 pandemic, are going through difficult times. The initial euphoria among small investors appears to have ebbed as the high interest rate level eases risk appetite. In addition, stubborn inflation and the weak US economic situation reduced the purchasing power of potential investors.
The result: Robinhood’s revenues are not increasing as much as hoped, trading volumes and user numbers have recently been stagnating or even declining. The US neo-broker responded to lower than expected revenue by cutting hundreds of jobs. Nevertheless, Robinhood does not seem to want to throw in the towel – quite the opposite: As part of the report, the US neo-broker announced that it wanted to expand into Europe in the coming weeks. Accordingly, Robinhood is already considering setting up brokerage activities in the United Kingdom.
Investors mostly pessimistic – with the exception of Cathie Wood
Investors have now reacted to the supposedly significantly lower growth opportunities in the neobroker industry and sold off corresponding stocks, which, in addition to Robinhood, is also symptomatic of the price slide of the crypto brokerage company Coinbase.
But there is still one well-known investor who by no means shares the pessimism about Robinhood’s prospects: Cathie Wood. The infamous US tech investor acquired a significant block of Robinhood shares on the day after the quarterly presentation, i.e. on November 8, 2023. As Cointelegraph reports, Wood bought a total of 1.1 million shares for about $9.5 million on that trading day. It is further stated that the purchase was made using three exchange-traded innovation funds (ETFs) managed by ARK, namely ARK Innovation ETF (ARKK), ARK Next Generation Internet ETF (ARKW) and ARK Fintech Innovation ETF (ARKF). ARKK was therefore responsible for purchasing 888,500 Robinhood shares (78 percent of the total purchase), whereas ARKW and ARKF collected 152,849 shares and 99,697 shares respectively.
Wood’s courageous Robinhood purchase is not an isolated case. Rather, the 67-year-old investor has taken advantage of Robinhood’s price weakness in recent months and has regularly expanded her stake in the neobroker. However, the purchases were usually smaller; for example, ARK bought 259,628 Robinhood shares on October 22nd and another 197,285 Robinhood shares for its ARKW funds on the following trading day. However, it remains to be seen whether the Robinhood securities will achieve a turnaround and whether Wood’s repeated purchases will ultimately pay off.
Editorial team finanzen.net
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