Robinhood Stock Jumps as Trading Rebound Helps Drive Earnings Beat—Key Level to Watch

Robinhood Markets, Inc.

Shares in Robinhood Markets (HOOD) rose sharply in pre-market trading Wednesday morning after the commission-free brokerage firm reported a surprise profit in the December quarter amid higher-than-expected interest income on customer loans and a rebound in retail trading activity.

The online brokerage at the center of the pandemic-era meme stock trading frenzy posted fourth-quarter adjusted earnings of 3 cents a share, whereas analysts had expected the company to report a 1 cent loss. Revenue of $471 million grew 24% year-over-year and also came in ahead of forecasts, which Wall Street had modeled at $455 million.

The company’s net interest revenue in the period grew 41% from a year earlier, driven by higher short-term borrowing rates, while its transaction-based revenue of $200 million improved 8% from the prior year, benefiting from increased trading activity across its cryptocurrency and equity offerings. The online broking firm pointed to a 6% fourth-quarter sequential jump in its monthly active user count as a sign that retail traders were wading back into the markets.

While the company did not provide specific top- and bottom-line guidance, Robinhood Chief Financial Officer Jason Warnick said he anticipates a strong 2024 based on favorable revenue and macro trends. “Looking at revenues, with the current macro backdrop, we’re finding for strong growth in 2024, driven by continued 20-plus percent net deposit growth, increasing gold adoption, double-digit gains and trading market share.” Warnick said in a post-earnings call late Tuesday.

The company, which rolled out its trading platform in the U.K. last November, also said it remains focused on expanding its crypto trading offerings in Europe, noting they are typically more profitable than stock trades.

HOOD has oscillated roughly within a five-point trading range since October 2022, establishing clear support and resistance levels on the chart. If the stock has a post-earnings rally, monitor how the price responds to the range’s top trendline around $13. A rejection of this important technical level could give way to a retest of the pattern’s opposing side, while breakout on heavy volume could mark the beginnings of a new uptrend.

Robinhood shares were up 16.1% at $13.74 around 7:45 a.m. ET.

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As of the date this article was written, the author does not own any of the above securities.