Challenges Ahead for Robinhood Markets
Analysts at JPMorgan Chase, led by Kenneth Worthington, foresee challenges ahead for Robinhood Markets (HOOD) concerning its cryptocurrency trading profits. They suggest that the impressive surge in digital asset revenues observed in late 2024 may not be sustainable into the first quarter of 2025. Robinhood is scheduled to unveil its first-quarter financial results on May 1, following the market’s closure.
Surge in Cryptocurrency Trading Revenue
Last quarter, the trading platform enjoyed a staggering 700% increase in its cryptocurrency trading revenue, which significantly boosted its overall earnings. However, analysts anticipate a downturn for the industry, predicting a drop in quarterly crypto trading volume from an impressive $71 billion to approximately $52 billion amidst recent trends of stock and bond sell-offs along with a decline in the cryptocurrency market.
Projected Decrease in Assets Under Custody
Additionally, Robinhood’s Assets Under Custody (AUC) may see a decrease, projected to be around 5%, settling at $183.3 billion sequentially, even though these figures reflect a remarkable 41% uptick compared to the same time last year. Despite the temporary retail investment spike attributed to U.S. tariff policies early in April, it appears that reversing the downward trend in the first quarter may prove too difficult for Robinhood.
Outlook and Rating Adjustment
Factors such as a reduction in demand for margin and derivatives trading could further hinder performance. As a consequence, JPMorgan has adjusted its outlook, maintaining a “Neutral” rating while lowering the target price by $1 to $44, signifying a potential 10% decline from its current status at $49 per share.
