IPO Stock That Doubled In Past Year Setting Up With Earnings Due

Robinhood Markets (HOOD) prepares to report earnings after the close for a first quarter that saw retail trading activity surge. But Robinhood stock tested a key level Wednesday after doubling in the past year.

On Monday, Robinhood revealed a Wells Notice, warning that the Securities and Exchange Commission could pursue enforcement action over cryptocurrency trading on its platform.

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Robinhood Earnings

Estimates: Analysts, on average, expect Robinhood earnings of 6 cents per share vs. a loss of 57 cents a year ago. Revenue is seen rebounding 25%, year over year, according to FactSet.

That would mark the Robinhood’s highest quarterly revenue since Q2 2021, which got a boost from meme stock mania amid the pandemic.

Results: Check back after the close.

Outlook: Analysts expect the first annual profit in 2024, of 30 cents per share. Robinhood, the upstart online brokerage which made its public debut in 2021, has an inconsistent history of quarterly profits. 

Robinhood Stock

Shares of the zero-commission trading app eased 1% to 17.83 on the stock market today. Robinhood stock retested the 50-day moving average Wednesday after regaining that support level week.

 A decisive move above the 50-day would offer an early entry in an emerging consolidation, using Monday’s high of 18.46 as specific trigger. HOOD stock is on track to have a base with a 20.55 buy point.

A February breakout from a cup base produced a 32% gain in 13 weeks, the MarketSmith pattern recognition shows. But the relative strength line for Robinhood stock has drifted lower since end of March. The RS line, the blue line in the chart above, shows how a stock is performing vs. the S&P 500.

Among other online brokers, Charles Schwab (SCHW), Interactive Brokers (IBKR) and E-Trade owner Morgan Stanley (MS) tried to gain Wednesday.

SEC’s Crypto Crackdown

On Monday, Robinhood disclosed an enforcement action notice from the SEC over crypto trading on its retail platform.

The so-called Wells Notice could portend enforcement action. Such notices do not necessarily mean the company has engaged in wrongdoing.

At the heart of the dispute is whether cryptocurrencies are securities are not. Robinhood argues crypto assets listed on its platform are not securities. The SEC argues most cryptocurrency tokens are securities and fall under its registration rules.

IPO Stock: Drivers Of Growth

In Q1, Robinhood earnings should benefit from a rebound in equity, options and crypto trading volumes, the company’s own and other data show.

Aside from trading revenue, Robinhood is likely to see growth in net interest revenue.

Analysts expect online brokers to grow margin loan balances, continuing to benefit from higher-for-longer interest rates.

Year to date, Robinhood stock has shot up 40%. Shares have nearly doubled in the past year, up 99.5%, but remain far below their post-IPO high, set in August 2021.

The price of bitcoin can be a driver for Robinhood stock, with cryptocurrency moves key for the brokerage’s crypto trading. Bitcoin fell modestly Wednesday around $62,000, pulling back from record highs in March.

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