August 19, 2021

Bloomberg – Robinhood Markets Inc. slumped after warning cryptocurrency-driven buying and selling that fueled quarterly income might shortly fade.

The web brokerage, which grew to become a family identify as cooped-up customers wager on property like cryptocurrency Dogecoin and meme shares, fell 10% on Thursday. The corporate mentioned seasonal points and decrease buying and selling exercise will impression third-quarter outcomes.

“The narrative is beginning to unwind,” mentioned David Coach, chief govt officer of analysis agency New Constructs. Robinhood’s steering that buying and selling exercise and account progress might sluggish is a significant warning to buyers, he mentioned, with expectations that the corporate’s efficiency will “be nowhere close to what’s required to justify the inventory value.”

The inventory stays up 18% since its IPO, giving it a market worth of $38.2 billion, and markedly outperforming the S&P 500 Index over the identical interval. Wild swings within the first weeks of buying and selling amid rising curiosity from newbie buyers drew Wall Avenue to model the buying and selling app a so-called meme inventory.

The corporate is “at a pivotal level as fairness buying and selling quantity fades and energetic app customers and downloads slip from a robust 2021 begin,” Bloomberg Intelligence analyst Julie Chariell wrote.

Robinhood’s income topped expectations powered by customers who gambled on digital property like Dogecoin and Bitcoin as costs soared then tumbled. Whereas the flurry of crypto buying and selling powered outcomes, fading euphoria round Dogecoin paired with expectations for much less energetic buying and selling because the U.S. financial system reopens additional might impression the brokerage’s progress.

Wolfe Analysis analyst Steven Chubak warned purchasers to “watch out for DOGE” given its outsized contribution. Expectations for a 3rd third-quarter slowdown “might be way more acute than many buyers had been anticipating.”

Menlo Park, California-based Robinhood, which went public final month, purchased Say Applied sciences, a software for shareholder voting and communication, earlier this month.

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