Robinhood Markets (HOOD) disappointed with its Q3 print, leading investors to dump its stock. Shares of this tech-based financial services company declined about 9% in the pre-market session, and it could continue to face heat from investors as its website traffic has declined from the past two consecutive quarters, implying weakness in its monthly active user base.
Per TipRanks’ new Website Traffic tool, total visits on Robinhood.com have declined more than 50% since Q1. This is important as a slowdown in traffic has weighed heavily on its key performance metrics as reflected by the sharp sequential decline.
It is interesting to note that Robinhood’s ARPU (average revenue per user), MAU (monthly active users), and adjusted EBITDA declined on a quarter-over-quarter basis in Q3.
Robinhood’s MAU fell from its peak of 21.3 million to 18.9 million in Q3. Meanwhile, its ARPU has marked a sharp sequential decline in the past two consecutive quarters. Further, it fell about 36% on a year-over-year basis. Robinhood posted an adjusted EBITDA loss of $84 million compared to earnings of $59 million in the prior-year period.
Its revenues of $365 million increased by 35% year-over-year but missed the Street’s estimate of $431.5 million by a significant margin. Further, its Q3 revenues marked a sequential decline of 35%. Along with revenues, its net cumulative funded accounts remained muted on a quarter-over-quarter basis.
To be fair, Robinhood had warned earlier that seasonal headwinds and lower trading activities would likely have taken a toll on its top line and new funded accounts in Q3.
Looking ahead, the company expects to add 660,000 new funded accounts in Q4. However, this indicates that net cumulative funded accounts will remain flat on a sequential basis. Also, Robinhood projects its Q4 revenues to be no greater than $325 million, implying a sequential decline of at least 11%.
In response to its Q3 results and next quarter outlook, Mizuho Securities analyst Dan Dolev stated, “With top-line results significantly below expectations (ours as well as consensus), lower MAUs, declining ARPU, very negative adjusted EBITDA…and disappointing Q4 guidance including no uptick in new funded accounts, we believe Q3 may be poorly received and we expect a negative stock reaction.”
However, Dolev pointed to the progress on the crypto wallet and normalizing “equities/crypto revenue mix” as positives.
He maintained a Buy rating on HOOD stock with a price target of $68, implying 71.9% upside potential.
Turning to the HOOD website traffic, we find that Robinhood’s site visits are trending lower. The company tallied 172.3 million total visitors in Q3. That number is 41.2% lower than the 292.9 million visitors recorded in Q2. However, it is still up about 157% from 67 million in the year-ago quarter.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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