The trading platform Robinhood (HOOD) announced impressive first-quarter profits yesterday, with a 40% year-over-year increase in revenue driven by a spike in cryptocurrency trading. This led to some analysts raising their projections for profitability and price targets.
KBW kept its market perform rating but increased its price target from $20 to $21.50. Competing broker JMP maintained its market outperform rating while increasing its price target to $30 from $28. The stock increased more than 4% in early Thursday trading after closing at $17.85 yesterday. This year, their gains have exceeded 40%.
Stronger-than-expected revenues from cryptocurrency trading drove up earnings per share (EPS) in the quarter, beating both consensus and our own expectations. Lower expenses also helped to contribute a penny to the $0.05 adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) beat, according to KBW analysts led by Kyle Voigt.
Revenue from cryptocurrency transactions more than tripled from the same period last year.
According to KBW, two additional important lessons learned were the platform’s Gold Card’s positive client reaction and the company’s increased EBITDA margin.
According to JMP, the business “delivered record net new deposits of $11.2 billion (a 44% annualised rate), including positive net flows from all major brokerages and 75% of deposits from customers who have been using the platform for more than a year, among other factors.”
More than in the entire previous year, the well-known trading platform attracted 500,000 new accounts in the quarter, marking the largest number of new accounts since the first quarter of 2022, according to JMP. According to the broker, the positive trend has persisted, with record-breaking $5 billion in deposits in April compared to the $3.7 billion monthly average in the first quarter.
JMP analysts under Devin Ryan noted, “We expect further acceleration in deposits and new customers, with enhancements to the Gold offering also increasingly contributing.”
It anticipates that Robinhood “will put up a strong fight against the SEC and not back down on its crypto business,” according to Bernstein. On May 4, Robinhood was issued a Wells Notice, which is a preliminary warning from the regulatory body stating that it feels it has sufficient information to pursue an enforcement action.
Analysts Gautam Chhugani and Mahika Sapra stated, “We continue to expect continued customer traction in crypto trading, while regulatory clarity takes its course.”