Wednesday was not a fun day to be invested in Robinhood Markets (HOOD). The trading platform's stock plummeted ~10% following a disappointing Q3 print, driven by a big sequential decline in cryptocurrency transactions. Specifically, crypto trading revenue dropped by a huge 78% from $233 million in Q2 to $51 million in Q3.
In total, the company delivered revenue of $365 million, up by 35% year-over-year, yet $72.55 million shy of the consensus estimate. The company reported a loss of $2.06 per share, worse than the loss of $1.37 per share Wall Street had called for.
Things aren't expected to improve either, with the company guiding for Q4 revenue to come in no higher than $325 million; the Street was expecting roughly ~$498 million.
If that wasn't enough of a letdown, lockup expirations for early investors are coming into play, with almost 49 million shares eligible for resale on October 28 with the other 50% about to hit the market on November 10.
Accordingly, based on that factor in addition to an anticipated downward revision of consensus revenue estimates to more reflect HOOD's Q4 guidance, Rosenblatt analyst Sean Horgan expects the stock to "face pressure in the near term."
It's not all doom and gloom, however. The company's recently launched crypto wallet currently has more than 1 million people are on the waiting list, and improving quarter-to-date crypto activity plus several new and potential product launches, such as early direct deposit, retirement accounts, crypto rewards "may provide an offset to the downward pressure." Additionally, the "low-bar" set for Q4 could potentially work in investors'' favor.
"Net/net," Horgan summed up, "The short-term setup is volatile (starting with an unlock on 10/28) but the long-term setup towards the end of the year points to a possible inflection point for the stock, in our view."
To this end, Horgan reiterated a Buy rating on HOOD shares, along with a $50 price target. According to the analyst, there's room for a 41% uptick from current levels. (To watch Horgan's track record, click here)
As expected, there have been plenty of HOOD revisions on the Street following the Q4 print; currently, the stock has a Moderate Buy consensus rating based on 8 Buys vs. 5 Holds and 1 Sell. The average price target stands at $50.08, practically the same as Horgan's objective. (See HOOD stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.