Robinhood Markets Inc.’s
the stock fell 14% in premarket trading after the brokerage reported a $423 million loss for the fourth quarter.
The company had an increase in technology and administrative costs that came at the expense of bottom line.
The brokerage used by individual investors posted revenue of $363 million for the October through December period, up 14%.
For the year, Robinhood posted an 89% increase in revenue to $1.82 billion, up from $959 million the previous year. The company’s net loss was $3.7 billion for the year.
Robinhood’s results exceeded analyst expectations. Analysts polled by FactSet expected fourth-quarter revenue of $376 million and a net loss of $225 million.
The 2021 brokerage experienced momentum in its options and cryptocurrency trading business as individual investors engaged in riskier and more speculative trading strategies. But in the fourth quarter, the company said, revenue linked to stock trading fell 35% to $52 million from $80 million.
By contrast, revenue linked to client options trading rose 14% to $163 million.
Robinhood became a darling of the Covid-19 era, as millions of new investors started trading. The brokerage now has 22.7 million clients, it said Thursday, up from 12.5 million in 2020.
The company faces stiff competition. Asset managers such as Fidelity Investments and BlackRock Inc.
have used their economies of scale to increase profits even while cutting fees. They have also focused on adding products with higher costs.
Robinhood started the first half of 2021 in a strong position as millions of investors entered the market to trade meme stocks like GameStop Corp.
and cryptocurrencies such as dogecoin. But as the year progressed, it was difficult to maintain the momentum. The company experienced a slowdown in revenues related to customer trading. Revenues related to cryptocurrency trading were hit particularly hard in the third quarter.
The new year has brought no relief, with trade continuing to decline, the company said.
Robinhood lowered its revenue guidance for the first quarter to less than $340 million, which would be a 35% drop on the upside.
Jason Warnick, Robinhood’s chief financial officer, said in an interview with the media that trading activity has increased in recent days.
mr. Warnick said the company plans to roll out products aimed at long-term investments. He said the company expects to introduce tax-advantaged retirement accounts by mid-year and that there is an opportunity to expand internationally, particularly in the cryptocurrency space.
The company has started rolling out cryptocurrency wallets for some customers this month, he said. The move will allow customers to move their crypto holdings in and out of the Robinhood app.
Shares plunged in after-hours trading after closing at $11.61 on Thursday, down 6.5% from Wednesday’s close. Robinhood’s stock has been penalized lately, as investors flow out of growth companies that were popular last year. Based on Thursday’s close, Robinhood has lost 69% of its initial public offering price of $38 a share.
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Appeared in the January 28, 2022 print edition as “Robinhood Posts Loss, Sending Stock Into Nose-Dive.”