Robinhood stock is currently in a ‘dumpster fire situation’, retail trader says

Robinhood stock is currently in a ‘dumpster fire situation’, retail trader says

Robinhood stock is currently in a 'dumpster fire situation', retail trader says

Robinhood (HOOD) stock has been on a downtrend since its IPO in July last year. The financial services company, which aims to “democratize finance for all,” also recently released a lackluster earnings report for the first quarter of 2022.

Amid Robinhood’s financial woes, YouTube channel host and retail trader Matt Kohrs believes the outlook is bleak for the company’s stock.

“At least from the retail community, which I’m thankfully a member of, I don’t really think the sentiment has changed, I mean, it’s a dumpster fire,” Kohrs told Yahoo Finance Live. . “I mean, in 2021, they’ve managed to throw $3.7 billion in a pit, douse it in gasoline, and set it on fire. And it looks like they’re not really changing course, so that we are entering 2022.”

Kohrs joined Yahoo Finance Live to discuss Robinhood’s quarterly results and why retail traders are leaving the platform. The company posted a bigger-than-expected loss for the quarter ended March 31, as total net revenue fell 43% year-over-year to $299 million. The first quarter of 2022 marked Robinhood’s fifth consecutive quarterly revenue decline, with total net loss of $392 million, or $0.45 per diluted share.

Monthly active users also fell 10% year-over-year – a blow to Robinhood’s payment-for-order-flow (PFOF) business model, for which the online brokerage has come under fire in the past. Berkshire Hathaway (BRK-A, BRK-B) Vice Chairman Charlie Munger, an outspoken critic of the PFOF model, likened Robinhood’s financial reckoning to “God enacting justice.”

“I think there’s definitely a leap now,” Kohrs said. “People are ditching Robinhood for other commission-free brokers. But I think there are two big ways to look at this. If we look at the classic fundamental analysis of what’s going on, their monthly active users quarter over quarter are down about 1.4 million, and on top of that it’s worse because they’re also getting less money per user – revenue drops.

Kohrs noted that the retail community’s perception of Robinhood is central to its use and, therefore, the performance of its stock. And right now, he said, retail marketers view the platform as “a bit closer to the Sheriff of Nottingham” – the unjust bully in the Robin Hood story – rather than the titular hero. himself.

“There’s definitely been an exodus from Robinhood,” he said. “One of the ones that I know is getting really popular is Public. It’s another commission-free brokerage. But the difference is there’s no payout for order flow. Like retail traders in learn more and more about what is going on in terms of market structure…they are happy to pay a commission, understanding that [they’re] pay for transparency, or they go to those who simply don’t engage in order flow payment.

Robinhood and cryptocurrency

Even in terms of cryptocurrency exchange offerings, Robinhood may fall behind the competition. The company said in its latest earnings report that its cryptocurrency trading revenue fell 39% year-over-year to $54 million from $88 million in the first quarter of 2021.

And while Robinhood Crypto has added the ability to buy and sell popular cryptocurrencies like Shiba Inu (SHIB-USD), Solana (SOL-USD), Compound (COMP1-USD), and Polygon (MATIC-USD) to mid-April, Kohrs thinks maybe it’s too little, too late.

“So even though they’re trying to rebrand and really focus on crypto, it seems like it’s going a little too slow in that their burn rate right now, like I said, [was] $3.7 billion last year,” he said. “They’ve already burned over $300 billion more this first quarter. And really, the feeling of that, I just don’t see a lot of people. In terms of stocks, options, and crypto, I believe there are various brokerages and exchanges that are more reliable than Robinhood.

Thomas Hum is a staff writer at Yahoo Finance. Follow him on Twitter @thomashumTV

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