Robinhood shares dip 10% on lower crypto revenue

Yahoo Finance's Brian Sozzi, Julie Hyman, and Brian Cheung break down the latest quarterly earnings from Robinhood.

Video transcript

JULIE HYMAN: This is Yahoo! Finance live. We're coming up on the opening bell here this morning. And as promised, we've got a lot more earnings to get through. Let's talk about Robinhood here for a moment because the stock notable in its movement this morning, going down by about 10%. You can see there in the numbers. Missing estimates. A lot of it had to do with crypto transaction revenue. It was down 78% quarter over quarter. What's going on here Soz? Is Coinbase just eaten their lunch?

BRIAN SOZZI: I think the way Robinhood explains it, there is a little bit of seasonality here. But to your point, Julie, there is disappointment in the crypto related revenues, the transaction based revenues. Also the company hopped in the earnings call yesterday and said they were not quote, "not focused on near-term profitability", which is always I'm sure tough to hear if you have been a Robinhood bull and there's certainly been many of them.

For them, they're really focused on adding a lot more features to the platform. Of course, their new crypto wallet, which has one million people in a waitlist, that will be rolling out in a few weeks. Now, I did have a chance to talk to Robinhood's CFO Jason Warnick last night about the outlook. He's telling me quote, "Looking ahead, what we did is we looked at the first couple of weeks of October and we made what we think is an appropriately conservative assumption to arrive at our guidance."

So from that perspective, Robinhood views their guidance as somewhat conservative and that guidance is for fourth quarter sales of about $325 million. The consensus estimate into that report was for about $497 million. So Robinhood taking a cautious approach given the trends they are seeing in their business. But Warnick is optimistic about the impact that this really latest boom in crypto is likely to have on Robinhood.

And last night at least I asked him, where at all the retail traders go? Retail trading or sales, stock trading in the quarter for Robinhood down 27%. He says they're still there. They're just dealing with seasonality. People are back out moving again, maybe not trading as much.

- For what's worth, some of these comps are a little bit difficult because all the metrics for Robinhood really spiked in quarter one and then quarter two in the aftermath and during the meme stock phenomenon of earlier this year. But still, I mean, monthly active users, even though they were down quarter over quarter, it's still relatively comparable to where they were pre-2019, but there were some noticeable declines where their numbers didn't look so good compared to 2019.

What you're looking at again, monthly active users. Again, not too much change from comparisons to quarter one 2021, but it was in the metrics that really mattered, where you saw the real breakdown. Average revenue per user for example, in the peak of the craze, was about $137 per Robinhooder, if that's what you want to call them. But now it's about $65, which is actually substantially lower than pre-pandemic levels that we had seen in the fourth quarter of 2020, for example.

So that is a top line metric, by the way. That doesn't factor in the expenses, which by the way, were a lot higher in this quarter although to be fair, that was often associated with the costs linked to the IPO. But again, Hood is a stock that hasn't been loved over the last month anyway, so even if you do see the stock move down on today's news, again, this is just kind of extending a trend that we have already seen over the last month. It's down about 11% compared to the S&P 500's gain of about 2.5% over that period.

JULIE HYMAN: Bottom line, people not feeling good about Hood this morning.