It's been a tough start to the year for Robinhood Markets (HOOD 3.88%). Things did not get any better following its first-quarter earnings report, as the stock tumbled on disappointing results. Its share price is now down more than 35% year to date, as of this writing.
Let's take a closer look at its results to see if this is a buying opportunity.
NASDAQ: HOOD
Key Data Points
Crypto woes continue
For the second quarter in a row, a large decline in cryptocurrency revenue stole the spotlight from what was otherwise a strong quarter from Robinhood. Once a big revenue driver, the online broker saw its crypto revenue plunge 47% to $134 million.
However, the company is not backing away from this area, with planned international crypto trading launches, including in Canada, later this year.
Overall transaction revenue increased by 7% to $623 million. The company saw a big boost from its predictions offering, with "other" revenue, mostly consisting of event contracts, surging 320% to $147 million. Options revenue rose 8% to $260 million, while equity revenue soared 46% to $82 million.
Net interest revenue climbed by 24% to $359 million, while other revenue jumped 57% to $85 million, led by a 32% increase in Robinhood Gold subscription revenue to $50 million. Robinhood Gold subscribers rose by 36% to 4.3 million. Meanwhile, total platform assets soared 39% to $307 billion.
Looking ahead, Robinhood said the second quarter was off to a solid start, with both option and equity volumes expected to reach their highest monthly levels for the year in April. It said that net deposits for April have already exceeded $5 billion. Crypto revenue remained steady.
The company also plans to invest $100 million this year to offer so-called Trump accounts, which are the nickname for the new IRAs for minors that the government plans to seed with $1,000 for children born between 2025 and 2028. The company was selected as the sole initial trustee for these new accounts by the U.S. Department of the Treasury.
Image source: The Motley Fool.
Is the stock a buy?
Robinhood continues to do a nice job of increasing deposits and growing its offerings. Ultimately, that's what the company can somewhat control, as things like transaction volumes tend to be more market-driven. The broker has always been strong in the options market, and its equity business is doing well. Meanwhile, the investment in starting its Trump account business looks like a smart move, as it can help bring in the next generation of customers to its platform.
Robinhood's crypto business has struggled after years of strong growth, and it likely will remain volatile. Meanwhile, its foray into the predictions market is a double-edged sword. It could be a strong growth driver, or it could get upended by new regulations.
The stock trades at a forward price-to-earnings (P/E) ratio of about 29 times based on analysts' 2026 estimates. Given its still solid growth and opportunities ahead, I think investors can look to take a small position in the stock on this dip. The biggest risk could be if the plug gets pulled on sports betting on prediction markets, as this segment was a big growth driver in the quarter, or if there's a bear market in stocks.
