Robinhood Stock Sinks as Promotions Lead To Weaker-Than-Expected Results

Shares of Robinhood Markets (HOOD) fell 15% on Thursday, a day after the online brokerage posted worse-than-expected results as a promotion to attract more clients weighed on performance.

The company reported third-quarter earnings per share of $0.17, with revenue jumping 36% year over year to $637 million. Both were below consensus expectations from analysts polled by Visible Alpha.

Contra revenue of $27 million from customer matching results

Robinhood noted that revenue decreased by $27 million “due to customer-paid matches on transfers and deposits.” Chief Financial Officer (CFO) Jason Warnick said on the earnings call that these “contrary revenues” are expected to grow sequentially by a similar amount in the current quarter, before slowing next year, according to a transcript provided by AlphaSense.

“Clients love the matches we offer on asset transfers and IRA contributions, and we are seeing great redemption periods on these matches,” Warnick explained. However, he noted that the company’s increased gold deposits “did not increase customer activity as much as our other promotions did.”

However, Robinhood noted that the increase in gold subscriptions was the main reason behind its 42% increase in “other revenue.” Transaction-based revenue rose 72% thanks to higher options trading, cryptocurrencies and stocks. Net interest income increased by 9%.

Robinhood Markets shares have fallen from their highest level in nearly three years, but despite that, they are up nearly 90% year to date. They got a boost earlier this week when the company announced it was offering clients the ability to trade based on the results of the US presidential election.