The growing clout of everyday investors has shaken up Wall Street, forcing hedge funds and big-time asset managers to start paying attention to armchair traders pumping their extra cash into the market.
But after a blockbuster start to the year, when traders coordinating on social media sparked a wild rally in meme stocks like GameStop and AMC Entertainment, activity has settled down.
Robinhood, the commission-free trading app that helped facilitate the boom, reported disappointing revenue after markets closed on Tuesday. Shares were down 9% in premarket trading.
The company, which went public earlier this year, said that it hauled in $365 million during the third quarter. That’s sharply lower than the $565 million in revenue reported during the second quarter. Monthly active users also fell 11% quarter-over-quarter.
Driving the decline was a drop-off in cryptocurrency trading. Revenue from crypto was just $51 million between July and September, compared to $233 million between April and June, when bitcoin and other digital coins reached new highs and then plunged.
“In [the third quarter], crypto activity came off record highs, leading to fewer new funded accounts and lower revenue as expected,” CEO Vlad Tenev told analysts. “Historically, our growth has come in waves. The surges have come during periods of increased volatility or market events.”
Robinhood thinks the rest of the year will remain muted, assuming nothing dramatic happens. It projected weak fourth quarter revenue of less than $325 million.
“As a reminder, our industry sees a typical seasonality curve that shows higher growth in the first quarter of the year versus the last three quarters,” said Jason Warnick, the company’s chief financial officer.
