Robinhood sees rebounding trading volumes across equities, options and crypto

Online trading app Robinhood has unveiled its January operating data, showing a rebound in trading volumes. It was welcome news for investors after Robinhood’s Q4 revenue from options, cryptocurrencies and equities all went in the same direction — down. 

The tide began to turn in the new year, alongside a slight recovery in the financial markets. Robinhood revealed that January trading volumes were up on a month-over-month basis across equities, options and cryptocurrencies. Equities saw a 19 per cent jump to $46bn, while options contracts increased by 10 per cent to nearly 83m. Cryptocurrencies trading volume soared 95 per cent vs December to $3.7bn alongside signs of strength in the bitcoin market.  

The online broker also experienced an increase in its assets under custody last month, which jumped 20 per cent vs December levels to $74.7bn. 

Robinhood could use the momentum. Not only did the company miss earnings expectations in Q4, and report a net loss of $1bn for 2022, but it also suffered a costly trading mistake, adding insult to injury. The trade surrounded shares of Cosmos Health, which due to the trading error triggered a short sale that ultimately cost Robinhood $57m to repurchase the shares even as the stock was rising. 

Signs of life in the cryptocurrency market have also served as a tailwind for Robinhood in recent weeks. However, crypto has been a double-edged sword for the company. 

Robinhood had exposure to FTX after the beleaguered crypto exchange acquired a 7.6 per cent stake in the online broker through a holding company and with a loan funded by Alameda Research. Now Robinhood is in talks with the US Department of Justice to repurchase those shares, worth a reported $575m. The DOJ seized the shares earlier this year as potential payback for victims of the fraud. 

Robinhood CEO Vladimir Tenev said on the company’s Q4 earnings call that the repurchase, if successful, would “remove the distraction for shareholders.” 

That’s one way to put it. However, HOOD shares were in the doldrums long before FTX filed for bankruptcy in November. Robinhood’s stock sank as low as $6.81 in June 2022 compared with an IPO price of $38 per share. 

Meanwhile, Wall Street analysts turned slightly bullish on HOOD stock lately, some more than others. Piper Sandler analyst Richard Repetto sees signs the company is “doing all the right things.” Meanwhile, JPMorgan and Deutsche Bank both raised their price targets on the stock from $9 to $11 this month. However, they maintain underweight and hold ratings on the stock.