The company’s net loss widened from $11 million to a whopping $1.32 billion, or $2.06 per share, which also missed expectations by $0.69.
Robinhood’s full-year forecast for “less than $1.8 billion” in revenue, which would represent 85% growth at the top end, also missed analyst expectations for 111% growth.
Those strategies locked in a lot of younger users.
In 2020, Robinhood’s number of monthly active users rose 172% to 11.7 million as its total revenue soared 245% to $959 million.
Robinhood’s transaction-based revenues, which accounted for 73% of its top line, rose 32% year over year to $267 million during the third quarter.
In short, more of Robinhood’s active users are engaging in riskier options and cryptocurrency trades than simply buying or selling stocks.
But when it went public, it launched a stock-based compensation plan that would pay its founders billions of dollars in bonuses if its stock price hit certain targets after its IPO.
In the first nine months of 2021, Robinhood paid out a whopping $1.25 billion in share-based compensation related to that plan — nearly all of which was recognized in the third quarter.
Excluding its stock-based compensation from both periods, Robinhood would still have posted a net loss of $72.4 million in the third quarter — compared to a loss of just $9.1 million a year earlier.
With a market cap of $33 billion, Robinhood trades at over 18 times the high end of its revenue forecast for the full year.
Investors should see if Robinhood’s sequential growth stabilizes, it reduces its dependence on volatile cryptocurrencies like Dogecoin, and it overcomes the SEC’s regulatory challenges before buying this beaten-down stock.