The Robinhood (HOOD) stock price has collapsed to an all-time low. The sell-off continued on Thursday after the company published weak quarterly results. It is trading at $11.60, which is significantly lower than its all-time high of $85. As a result, its total market capitalization has collapsed to over $9 billion.
Robinhood stock collapse explained
Robinhood is one of the most disruptive companies on Wall Street ever. Started in 2011, the company disrupted companies like Fidelity, Schwab, and TD Ameritrade that had existed for years. It did that by allowing investors and traders to buy shares for free without paying a commission.
Robinhood’s influence was so strong that it forced all companies in the industry to change strategy. In 2019, all these firms decided to remove most commissions as they lost market share to Robinhood.
Robinhood’s popularity surged in early 2021 during the so-called Wall Street Bets craze. At the time, a band of retail investors decided to pump and dump stocks like GameStop, AMC, and Blackberry. The company gained millions of clients, and it decided to go public.
The first few days of it as a publicly-traded company were great as its stock surged to $84, giving it a valuation of over $50 billion.
Recently, however, the Robinhood stock price has dropped sharply because of three main reasons. First, it is a tech-enabled company, which means that it is affected by Fed policy. With the Fed hinting at rate hikes later this year, investors have rotated from unprofitable growth stocks to value.
Second, the company’s growth has slowed as more retail traders go back to work. Finally, as I will explain below, it has a record of revenue and earnings misses.
Robinhood earnings
On Thursday, the Robinhood stock price collapsed by over 6% during the regular session. It then continued falling during the extended session after the firm reported weak results.
The company’s total net revenue for the quarter rose by 14% to $363 million, which was lower than еhe median estimate of $370 million. It had made $318 million in the previous quarter.
Its transaction-based revenue rose by 12% to $264 million as its options income jumped by 14% to $163 million.
In total, the company’s losses continued rising in the final quarter of the year. It lost $423 million or $0.49 per share in the quarter.
The HOOD stock price declined by as much as 15% after the results because they missed what analysts were expecting. Most importantly, the company predicted that its net customer additions will slow this year. In the final quarter of 2021, the firm’s new customers increased by 81%, pushing the total to 22.7 million. The average revenue per user crashed to $64 because of lower trading volumes.
Therefore, fundamentally, there is a likelihood that the Robinhood stock price will keep falling considering that volume of both stocks and cryptocurrencies is expected to decline this year.
HOOD stock price forecast
The four-hour chart shows that the Robinhood stock price has been in a sharp downward trend in the past few months. The stock ended Thursday at 11.60% and then crashed by double-digits in extended hours. It has moved below the 25-day and 50-day moving averages while the Relative Strength Index has crashed to the oversold level. Therefore, there is a likelihood that the stock will keep falling in the near term as investors price in the firm’s low margins and slow growth.
