Robinhood Markets Inc saw a significant boost in its shares during premarket trading on Thursday following the announcement of record-breaking first-quarter (Q1) revenue and profit. The surge in performance comes as individual investors, known as mom-and-pop investors, returned to the commission-free platform to trade cryptocurrencies.
In premarket trading, Robinhood’s shares rose approximately 4%, adding to a year-to-date surge of 40%. This remarkable growth underscores the increasing popularity of retail trading, particularly in the cryptocurrency market, amidst record highs in both bitcoin and U.S. stocks earlier this year.
The revival of retail trading was bolstered by the approval of the first spot bitcoin Exchange-Traded Funds (ETFs) in the U.S. in January. These developments have helped restore investor confidence in the crypto industry after enduring several high-profile collapses over the past couple of years.
The impressive Q1 financial results of Robinhood exceeded Wall Street expectations, with a 40% surge in revenue and a profit of 18 cents per share, compared to a loss of 57 cents per share a year ago. The company’s cryptocurrency revenue more than tripled, reaching $126 million, while equities revenue soared by 44%.
Robinhood’s resurgence comes after a turbulent period during the 2021 retail trading frenzy, where the platform was at the center of speculative trading in “meme stocks.” However, the company faced challenges as household budgets were strained by soaring inflation and rising borrowing costs.
Despite the positive earnings report, some concerns were raised by the disclosure earlier this week that Robinhood’s crypto trading arm had received a Wells notice from the U.S. Securities and Exchange Commission (SEC) regarding tokens traded on its platform. A Wells notice is typically issued when the regulator intends to initiate enforcement action against a company.
The company’s success in the first quarter underscores the resilience of its business model, which relies heavily on retail traders’ interest in cryptocurrencies. As the economy continues to navigate uncertainties, including inflationary pressures and potential interest rate hikes, Robinhood’s ability to capitalize on the growing demand for crypto trading will likely remain a key focus for investors and analysts alike.
