(Reuters) – Shares of Robinhood surged 12% in premarket trading on Wednesday, after the retail-investor brokerage reported a surprise profit in the fourth quarter and said it expects strong revenue growth in 2024.
Robinhood, on Tuesday after the bell, sailed past Wall Street expectations as it benefited from higher interest income from customers paying back loans and a rebound in trading driven by cryptocurrencies and equities.
Chief Financial Officer Jason Warnick, in a post-earnings call with analysts, said Robinhood expects strong revenue growth in 2024 and is focused on driving net deposits higher. The company also expects to keep expenses in check by growing profitably and keeping headcount roughly “flat-to-slightly up” this year.
Robinhood’s assets under custody (AUC) increased 65% year-over-year to $102.6 billion in the fourth quarter, primarily driven by continued Net Deposits and higher equity valuations.
Wall Street analysts also cheered the upbeat earnings report and said it puts Robinhood on a stronger footing going into 2024.
“Assets under custody breached $100 billion for the first time since Q2 2021, back near Robinhood’s meme trading peak. We are encouraged by solid inflow of assets to the platform,” J.P. Morgan analysts wrote in a note.
Robinhood was at the center of the 2021 retail trading frenzy, driven by mom-and-pop investors who used the company’s commission-free platform to pump money into so-called “meme stocks” during the pandemic-era lockdowns.
The Menlo Park, California-based company has been trying to diversify its business to reduce dependence on transaction-based revenue and more towards product offerings and ‘margin investing’.
Brokerage Piper Sandler said Robinhood will gain from “very strong net deposit trends” in the first quarter.
Robinhood reported a surprise profit of 3 cents per share in the quarter, compared with analysts’ expectations of a loss of 1 cent, according to LSEG data. Revenue rose to $471 million, sailing past expectations of $456.81 million.
(Reporting by Manya Saini in Bengaluru; Editing by Krishna Chandra Eluri)
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