Revival of Meme Stocks and Rise in Crypto Trading Expected to Boost Robinhood’s Second Quarter Performance

Authored by Manya Saini

(Reuters) – Analysts anticipate that Robinhood will post unprecedented revenue levels in Q2, driven by a surge in retail traders using its no-fee platform for trading trending ‘meme stocks’ and digital currencies.

Keith Gill, better known as “Roaring Kitty” on social platforms, has once again whet the market’s appetite for retail darlings such as GameStop, drawing individual investors towards Robinhood’s platform.

Trading volume for stocks on Robinhood jumped by 82% in April, followed by a 76% increase in May year-over-year.

“The company’s growth is expected to reflect the activities in the equity and cryptocurrency markets,” remarked Michael Ashley Schulman, a partner and the Chief Investment Officer at Running Point Capital Advisors.

Robinhood’s crucial role in the 2021 retail trade frenzy, which saw an extraordinary surge in meme stock investments during COVID-19 lockdowns, has become a part of its legacy.

Now at 11 years old, Robinhood continues to pursue expansion and evolve into a comprehensive provider of financial services.

Analysts from Citigroup note an upward trajectory, citing “notable increases in deposits, margin balances, and trading volumes in both options and equities.”

Optimism in the cryptocurrency space is also receiving a lift from what appears to be a loosening of regulatory tightness, specially after the U.S. SEC approved the inaugural spot bitcoin ETFs.

Despite facing regulatory hurdles and extreme market volatility, Robinhood is strategically focusing on cryptocurrency as the next significant growth sector.

In May, the trading volume for cryptocurrencies on its platform soared by 238%, while April saw a 173% rise compared to the same month the previous year.

As Robinhood enjoys the windfall of heightened trading activities, experts warn that such exuberance may not hold steady in the long run.

“The excitement from events like Keith Gill’s social media resurgence and the crypto ETF launches may be fleeting, posing a challenge for analysts to incorporate as durable trends in Robinhood’s financial forecasts,” commented Schulman.

Robinhood is expected to release its earnings report after the stock market session concludes on Wednesday.

ESSENTIAL FINANCIALS

* Forecasts suggest a 32% revenue increase to $643.34 million in Q2, with transactional revenues specifically anticipated to surge by 51%, according to LSEG figures.

* Market specialists project that Robinhood could announce a second-quarter EPS of 15 cents, up from 3 cents in the corresponding quarter the previous year.

MARKET OUTLOOK

* Out of 17 brokerage firms, six recommend the stock as a “buy” or better, nine suggest a “hold,” and two advise a “sell.”

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(Reported by Manya Saini in Bengaluru; Edited by Arun Koyyur)