Investors were hoping that stocks would regain their footing on Friday morning, but major market benchmarks still trended slightly lower in choppy trading. As of 10:15 a.m. ET, the Nasdaq Composite Index (^IXIC -0.52%) was close to the break-even point, down just 6 points to 13,347.
Earnings season has gotten off to a tumultuous start, and the most recent slate of quarterly reports was no exception. Robinhood Markets (HOOD) has seen a massive drop in its stock price lately, and its slide continued after it delivered a financial report that confirmed many of the challenges it has had to face. What was more surprising, though, was a downward move from Western Digital (WDC -2.64%) despite some big tailwinds supporting the data storage industry.
Robinhood keeps heading lower
Shares of Robinhood Markets were down another 5%. That was actually much better than where it started the day, with an opening decline of 14% taking the share price briefly below the $10 mark.
Robinhood's revenue rose 89% during 2021, coming in at $1.82 billion for the full year. Yet in the fourth quarter, revenue growth slowed to 14% year over year, with transaction-based revenue up just 12% from the year-ago period. Meanwhile, its net loss of $423 million for the quarter was worse than expected and brought the company's full-year loss to $3.69 billion, or $7.49 per share.
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A closer look at where Robinhood's revenues come from reveals a lot about the company. Offering cryptocurrency trading has been a huge boon for the broker, but of the $419 million in transaction revenue it got from crypto during 2021, only $48 million came in the fourth quarter. Meanwhile, equity trading revenue fell by 35% year over year in the fourth quarter. Options trading remained the big moneymaker for Robinhood, rising 14% to $163 million in the quarter and posting full-year growth of 57% to $689 million.
With cryptocurrencies broadly getting pummeled and the stock market experiencing significant volatility, a lot will hinge for Robinhood on whether its options traders can stay solvent in a tough market. If those customers start to flame out, it could be hard for Robinhood to recover.
Western Digital falls short
However, the more surprising drop came from Western Digital -- down almost 6% Friday morning. Even after rival Seagate Technology (STX -0.90%) posted strong results, Western Digital's numbers left investors wanting more.
Western Digital's fiscal second-quarter numbers weren't bad on their face. For the period, which ended Dec. 31, revenue climbed 23% to $4.83 billion, led by an 89% rise in cloud-based revenue. Adjusted earnings of $2.30 per share were more than triple what the data storage and infrastructure company posted in the year-ago period.
Yet investors seemed concerned about declines in nearly all of Western Digital's key metrics compared to its fiscal Q1, including sales and earnings. Moreover, the company's revenue guidance range of $4.45 billion to $4.65 billion for the current quarter would amount to another sequential drop, as would its fiscal Q3 projection for adjusted earnings per share of $1.50 to $1.80.
Businesses across the globe that are attempting digital transformations are, as part of those efforts, working to collect vast amounts of data and make the best possible use of it. That makes this a perfect time for Western Digital to shine. The fact that it hasn't lived up to shareholders' expectations under these favorable conditions is troubling enough to justify Friday's sizable downward move in the stock price.
