Robinhood Markets Earnings: HOOD stock off 10% in premarket after dismal Q3

• Robinhood misses Q3 revenue estimates by 17%.
• HOOD stock experienced heavily falling ARPU in third quarter.
• The trading app management foresees continued setbacks in Q4.

Robinhood Markets (HOOD) did little stealing from the rich in the third quarter. HOOD shares sank 8.3% in the after-hours trading on Tuesday, following a spectacular drop in net revenue reported for the third quarter. Net revenue arrived at $365 million compared to $565 million in Q2. Wall Street had expected $438 million. Likewise, Robinhood, operator of the popular stock and crypto trading app, lost $1.3 billion or $2.06 a share compared with consensus estimates of a $0.20 loss.

HOOD shares were down more than 10% in the premarket from Tuesday’s close, at $35.57 at the time of writing, well underneath its late July IPO price of $38 a share.

Robinhood Stock News: Pain should continue into Q4

Besides the top and bottom-line numbers, Robinhood just had a no good, very bad quarter. Net cumulative funded accounts fell by approximately 100,000 to 22.4 million. Monthly active users slid from 21.3 million in Q2 to 18.9 million. Assets under custody dropped from $102 billion to $95 billion.

Average revenue per user plunged from $112 in the previous quarter to $65. This was even below Q3 2020’s ARPU of $102.

One reason for the large-scale loss was a more than 200% QoQ explosion in operating costs. This figure rose from $501 million in Q2 to $1.7 billion in this quarter, though much of it was due to a $1.2 billion share-based compensation package.

Cryptocurrency revenue plummeted by an unexpected 78% from $233 million to $51 million. The only bright sign is that 1 million users have already signed up for the company’s yet-to-be-released crypto wallet.

Most worrisome to most investors was management’s admission that they did not expect any kind of turnaround in the fourth quarter. In fact, Robinhood expects about 600,000 newly funded accounts in Q4 – the exact same as this quarter. Additionally, management advised a continued fall in revenue to $325 million. This would reduce full-year revenue forecasts by about $200 million compared to analyst estimates.

Robinhood Stock Chart: Expect all-time low

With the HOOD price now sitting in the mid-$30s and the consensus price target at $50.78, according to Refinitiv, investors should expect a flurry of downgrades later today.

Based on the daily, HOOD stock price in the premarket is now down below the mid-September swoon where it briefly touched $39.23. Since it is well below here, and there is little price history in this region, traders should expect HOOD to retag the all-time low of $33.25. There was a serious deal of volume, however, in this mid-$30s range in the first week after the IPO. This means that $33.25 has a good chance of holding. Additionally, the S2 pivot point at $34.48 may also hold.

If not, and both of these levels cave, then the S3 support pivot at $29.74 is the only nearby barrier. Although unlikely, If institutional investors decide to throw in the towel, HOOD price could drop to the S4 pivot at $24.87.

HOOD 1-day chart