barrons.com
While Bitcoin has rallied some 70% this year amid expectations that the Federal Reserve’s painful campaign of interest-rate hikes is ending, the largest digital asset remains far off its late-2021 high near $69,000—it was trading below $30,000 on Thursday. The crypto winter is not quite over, and analyst Dan Dolev of Mizuho Securities expects the lag in digital asset trading—at the end of 2022, 20% of Robinhood’s core transaction-based revenue segment—to bite.
“We are trimming first-quarter revenue estimates primarily on weak crypto trading,” Dolev wrote in a Thursday note. “We note a mixed picture of quarterly movements in equity, options, and crypto markets…we see continued weakness in the crypto trading space, which unfortunately will impact Robinhood’s results.”
Mizhuo slashed its March quarter crypto trading revenue estimates for Robinhood by $24 million, the key contributor to an overall cut of first-quarter revenue expectations to $419 million from $437 million. (Dolev sees upbeat options trading, with Mizuho upping estimates by $14 million in that segment, helping offset crypto weakness.)
Analysts surveyed by FactSet expect Robinhood to post first-quarter revenue of $425 million, so Dolev’s team is a little south of average estimates. But Mizuho, unlike much of the rest of Wall Street—where the average analyst surveyed by FactSet gives Robinhood a Hold rating—is pretty upbeat on the broker, rating its shares at Buy with a $14 price target. Robinhood stock closed at $8.38 on Wednesday.
“We are increasing our adjusted Ebitda estimates for the full-year as we continue to see strong execution and cost controls helping boost profitability,” Dolev added, referring to earnings before interest, taxes, depreciation, and amortization.
Mizhuo hiked its expectations for Robinhood’s full-year Ebitda to $311 million from $189 million—well ahead of the FactSet consensus of $235 million.
Coinbase earnings, due after the bell on Thursday, could give investors an early hint of what’s to come in the crypto sphere when Robinhood reports on May 10. But shareholders may do well to consider the broker’s business beyond crypto, and take heed of the average price target among analysts implying 40% upside for the stock.
Write to Jack Denton at jack.denton@barrons.com