Robinhood delivers big earnings beat driven by booming crypto trading: Analysts

Trading platform Robinhood (HOOD) reported strong first-quarter earnings yesterday as a surge in crypto trading fueled a 40% year-on-year jump in revenue, leading some analysts to upgrade their earnings estimates and price targets.

KBW raised its price target to $21.50 from $20, while maintaining its market perform rating. Rival broker JMP raised its price target to $30 from $28 and reiterated its market outperform rating. The shares, which closed yesterday at $17.85, rose over 4% in early trading on Thursday. They have gained over 40% this year.

A “solid beat in the quarter to us and consensus as stronger than expected crypto trading revenues drove earnings per share (EPS) higher, with lower expenses also contributing a penny to the $0.05 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) beat,” KBW analysts led by Kyle Voigt wrote.

Crypto transaction revenue more than tripled from the year-earlier quarter.

Two other key takeaways were the strong reception by customers to new products such as the platform’s Gold Card, and the business’ EBITDA margin expansion, KBW said.

JMP noted the company “delivered record net new deposits of $11.2 billion (a 44% annualized rate), including positive net flows from every major brokerage, and also 75% of deposits coming from customers that have been on the platform for over one year.”

The popular trading platform added 500,000 new accounts in the quarter, more than in all of last year and the highest quarter for new accounts since first-quarter 2022, JMP said. Positive momentum has continued, with a record $5 billion in deposits in April versus the monthly average of $3.7 billion in the first quarter, the broker noted.

“We expect further acceleration in deposits and new customers, with enhancements to the Gold offering also increasingly contributing,” JMP analysts led by Devin Ryan wrote.

Bernstein said it expects Robinhood “to put up a strong fight against the SEC and not back down on its crypto business.” Robinhood received a Wells Notice – a preliminary warning from the regulator saying it believes it has enough information to bring an enforcement action – on May 4.

“We continue to expect continued customer traction in crypto trading, while regulatory clarity takes its course,” analysts Gautam Chhugani and Mahika Sapra wrote.