Robinhood earnings miss, crypto weakness fail to shake Wall Street’s bullish outlook

Wall Street analysts see Robinhood's growing prediction market and blockchain businesses as reasons to look past its slight third-quarter earnings miss on Tuesday.

Bernstein reiterated its outperform rating and $160 price target, while StoneX also kept a buy rating and a $170 target.

Robinhood reported revenue of $1.42 billion, while its crypto revenue fell 55% to $120 million from the same period last year.

StoneX analyst Mark Palmer said the negative reaction to results, which saw Robinhood stock Robinhood Markets, Inc. (HOOD) fall 10% in the hours after releasing them, was an overreaction.

"We read it differently," Palmer wrote, noting that it was an unrealized loss on its Robinhood Ventures Fund I that caused earnings per share to fall by $0.07. When excluding that loss and other items, earnings per share actually came in $0.60 above consensus.

Meanwhile, Bernstein analysts led by Gautam Chhugani said the crypto business is shifting from retail trading into an "infrastructure business." They expect prediction markets, perpetual futures, and its July-released Robinhood Chain to generate roughly 25% of Robinhood's revenue by 2028.

Robinhood Chain contributed $26 million in net revenue in its first quarter on mainnet. Excluding that, crypto revenue fell 6% from the second quarter to $94 million.

Bernstein said Robinhood earned less revenue per dollar of crypto activity, mostly due to growth in Robinhood Earn, its stablecoin product, which now holds more than $500 million in assets. Earn brings in less revenue than normal crypto trading, weighing down the overall average. With that line excluded, the amount Robinhood pulled in per dollar traded was roughly unchanged from the prior quarter.

Prediction markets were another segment of growth, generating $173 million in quarterly revenue. Bernstein noted that non-sports contracts doubled their share to around 30%, led by crypto, commodities, and financial contracts.