Why Robinhood Stock Crashed 11% after Earnings [WARNING].

a lot of folks have been asking me why

Robin Hood stock just crashed 3% after

being up as much as 8% after their

earnings that means the stock fell at

Delta of

11% that's insane why would it move 11%

to the negative after what we actually

really good earnings after all the

company is becoming profitable it has

record deposits moving in and record

revenues with operating expenses that

have been slashed imagine this imagine

taking a Javier Malay style

chainsaw and going in there and slicing

up

82% of your spending at Robin Hood that

is general and administrative expenses

down 82% from over half a billion dollar

647 billion all the way down to18

million how is all of a sudden saving

basically $500 million in expenses the

chainsaw at the same time as revenues

are up 40% in other words you cut

spending 82% revenues up 40% oh my gosh

what is happening how could the stock

fall 11% well I as well am surprised I

was playing some trades on Robin Hood

today and we were doing our live trading

like we usually do in our course member

live stream I exited the trade

profitably and there were a lot of

opportunities to exit the trade even

more profitably but there was a bad Omen

there was a bad bad bad Omen there was a

1794 line and as soon as we got I'll

show you the point right here as soon as

we got that failed breakout can't even

really call it a breakout it's more of a

rejection as soon as we got that failure

there game

over and uh sure enough the stock melted

away so why though what what could

possibly could be going on well I think

I figured it out now keep in mind if you

want to join uh the trade alert coupon

expires next Wednesday we're slowly

inching the prices up the demand for

this has been insane which has sort of

been a leading indicator for the fact

that Robin Hood would probably beat the

number of folks trading these days is

way way up which is great it means we're

finally getting back to a more

normalized Market as opposed to that

2020 disgusting Market where everything

was just Burning Up in Flames so let's

hop in over here what do we have and I'm

going to show you the problem at least

this is my opin opinion of the problem

could be something else okay transaction

based Revenue so in other words where is

Robin the hood making their dollar holas

from that is a big deal why is it a big

deal because watch this okay we're going

to do something here you could see the

following see the options Revenue that

they've earned their options revenue is

up by about

15.7% which is pretty good because we

know they make a lot of money on their

options trading but look at crypto

crypto folks crypto is up over 3x U my

HDMI is to loose for this apparently

there we go let's uh slide that in can

uh Stormy Daniels that okay too soon so

cryptocurrencies we're at

3.3x as a instead of a percentage and

then stock trading folks nominal stock

trading only went up by about 44% which

yeah that's higher than

options but it's still a fraction of the

money they make from options in fact

you're only making about

25% of your uh you're only making about

25% as much money on trading actual

stocks as you are options so they're

really incentivized to get you to trade

crypto and options so you'll see this

here on axios Robin Hood also posted

record net deposits of 11.2 billion and

Robin Hood sees record Revenue boosted

by crypto business that seems great

right but again head on over here to the

cash flow statement and you'll notice in

2023 the business was creating cash flow

$828 million of cash flow why are we

netive $623 billion here well because

once you adjust for the fact that you've

got to offset uh the cash that you're

receiving as usually cash you have to

segregate this $692 Million number here

basically means you've got cash

deposited here and you you have to put

that aside you can't actually use that

in your business that cash has to be

separated and be safe so it's redeemable

and you don't end up with an FTX so

you're not actually getting that cash

flow like a bank would Sofi does because

they're a bank they can do basically a

fractional money printing if you will

Banks don't print money but I'm being

I'm oversimplifying point is broker

dealers don't get that benefit so

deposits great but you're not

necessarily able to use those now why

does that matter well if we jump on over

here to revenues I want you to pay

specific attention to this $618 million

of revenues $460 million in expenses net

157 hm okay so we went from a big old

loss to a big old profit 157 mil but

remember that crypto number I reminded

you to keep in your mind don't worry I

already forgot it as well so their net

was

geez 157 and their crypto revenues were

126 now let's assume for a moment the

SEC comes in and says stop doing crypto

well now all of a sudden you have a

total of

80% of your profit poof Going Up in

Smoke and you're using cash in

operations now some of that again has to

do with deposits and how things are line

but what I think is the market is

trading on the risk of the potential

that Robin Hood could maybe end up

losing their ability to actually trade

crypto now the good news the bullish

news that Robin Hood has is that Robin

Hood is probably going to be more like a

coinbase than uh well let's just say a

company that ends up getting cut from

being able to you or conduct crypto

transactions you you can see here a Vlad

talks about the disappointing

development about that SEC Wells notice

they received about the crypto business

they believe that us consumers should

have access to the asset class and

remember that trading in crypto itself

is much more profitable for Robin Hood

than people buying the ETFs see people

buying the ETFs would actually be under

this bucket I believe at least right

here where you've got $39 million of

Revenue

that's a drop in the bucket compared to

126 mil coming from crypto and it's

worth noting this right here is a set of

transaction based Revenue now what's

remarkable about that is if you go over

to the earnings call you'll actually see

something very interesting look at this

right here volumes crypto volumes were

10 billion okay that's really

interesting because if crypto volumes

were 10 Bill and they made made

126 we can calculate the approximate fee

Robin Hood is making off of every dollar

of a trade so they say they made 126

million bucks off of crypto and that's

going to be in q1 now they're not going

to give us the trade volumes for q1 at

least not readily available so we're

going to have to assume that the trading

volumes for q1 are similar to what we're

seeing in April I don't love doing those

sort of assumptions but it's going to

give us an idea then we got 39 million

in revenues over here from equities and

options this will be a lot harder to

figure out as well but we'll write it

down just for comparison you can see

options in crypto obviously where

they're going to make a bulk of their

money now if I go to Q2 in the earnings

call we get a little sneak peek of Q2 so

notional volumes were $70

billion for uh um equities that's

actually just in April so notice that

that's just April volumes $70 billion

option contracts were u a monthly record

of $125 million so15 million a monthly

record we're going to write that down

that's pretty neat uh and we're going to

call that the volume so uh since

obviously we're talking about um trading

volumes here and uh crypto notional

volumes were around $10

billion okay this is really useful

because now we can jump in over here and

take a peek at what we can do we can

assume uh which I I realize this is just

April so it's not perfect but let's turn

April into a quarter and so all we're

going to do is multiply it by three just

to see how much money Robin Hood is

potentially making on all of these uh

various different uh items here now they

did say this was a monthly record so I'm

going to go ahead and wear this down by

I don't know 15% so I'll I'll take 15%

off of each of these because let's just

say that uh this month was uh April was

particularly hot great so we took 15%

off uh off of the uh money that they

made in the quarter and we tried to turn

this into a quarter so now we have

volume we're going to take the volume

and we're going to divide it by uh the

money they make or rather vice versa

money they make divided by the volume

and so what you get here is basically

how much of a commission Robin Hood

makes off of each one of these types of

Trades so we can go ahead and turn this

into a percentage I want you to see

something very interesting watch this so

this blows my mind I I can't imagine

that this is true but this somewhat

implies that Robin Hood is picking up a

spread of 48% on your option trades I

cannot believe that I don't think that's

true I think something is broken here uh

it it doesn't seem right but again they

did say right here that options

contracts were a record

of25 million and crypto notional volumes

were around $10 billion that seems

something funny is going on over here

with options uh but let's just ignore

options for a moment look at the money

they make off of stock trading so I'm

going to guess that something over here

is maybe off by the value of of a

contract so let's just divide this by

100 and it would show you that options

are roughly as profitable as crypto I

think that's much more accurate of an

analysis so I'm going to assume this

because I don't think anybody can get

away with charging that high of a

commission but it's obvious there's a

lot more money made in crypto and

options and so that's the point of this

video if they lose crypto they lose 80%

of their net in income and that might be

the risk factor here now again I don't

think they will because the SEC has had

a really hard time fighting coinbase and

I actually believe that coinbase is

going to beat the SEC in court I broke

all of that down over on ec.com uh when

the actual uh court case was being heard

or the initial hearings were being heard

on SEC versus coinbase on being a you

know Securities broker which is roughly

similar to what we're seeing the SEC

complain about now with Robin Hood uh

broker dealer violations and transfer

agent violations which is just a fancy

way of saying you're probably trading

unregistered Securities in the eyes of

the SEC similar complaint against coin

as against Robin Hood otherwise I have

to say kind of neat that Robin Hood's

currently getting almost $100 million in

annual recurring Revenue just from

people upgrading to Robin Hood gold the

thing to know about Robin Hood gold is

they're making it pretty easy to get

your 5% apy and it looks like soon

they're going to be offering well

they're credit card which you can

pre-sign up for but it's not out yet uh

and then eventually which also isn't out

at the moment they'll do some form of

deposit boost well they'll give you some

extra money if you deposit or transfer

new money over to Robin Hood we're not

actually seeing uh that available at the

moment though they do have the 3% Ira

matching so you're seeing some people

move those over they did mention in the

earnings call that some of the cohort

that is coming to Robin Hood is a

wealthier cohort than they're used to uh

or than usual uh in fact uh when they're

asked hey are these people who actually

go trading or what are they like they

say yeah well they're mostly similar the

only thing is they're coming in with

higher balances than our historical

customers so they're loving the quality

of money they're that's coming into

Robin Hood my guess is a lot of folks

looking for easy retirement account or

deposit account transfers are uh are

taking advantage of that uh anyway I'll

go ahead and put my Robin Hood referral

Link in the description down below if

you want to sign up this is not like a

paid promotion from Robin Hood uh uh

obviously everybody has an affiliate

link I'm just going to throw it down

there just in case you want as a thank

you to sign up but it's not a big deal

uh I think the bigger thing would be hey

if you want to join me in the stocks and

psych group or any of the other amazing

courses on building your wealth link

down below thanks so much and we'll see

you in the next one goodbye why not

advertise these things that you told us

here I feel like nobody else knows about

this we'll we'll try a little

advertising and see how it goes

congratulations man you have done so

much people love you people look up to

you Kevin pafra there financial analyst

and YouTuber meet Kevin always great to

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