Cramer says Robinhood's earnings call sounded like crypto trading on the platform may be a fad

Published Wed, Oct 27 202112:12 PM EDTUpdated Wed, Oct 27 20211:12 PM EDT

CNBC's Jim Cramer said Wednesday he was depressed by Robinhood 's third-quarter earnings call because it revealed the extent to which the newly public company relies on unpredictable crypto trading. "I had been hoping that younger people are going to come in, stick with it, buy long-term stocks," Cramer said on "Squawk on the Street." However, that didn't happen and neither did the robust crypto trading last seen in the second quarter, sparked by Elon Musk -hyped dogecoin . "If you read the conference call you'd think it's a fad," Cramer said of crypto trading on Robinhood. "If it's a fad … they've got a lot of people, 22 million, but they don't have a lot of money in their accounts." Cramer has been generally positive about Robinhood's mission of trying to democratize trading and pull younger investors into the market. Robinhood sank more than 10% midday Wednesday to around $35 per share, dipping below its initial public offering price of $38 per share. Investors grew concerned after the company reported late Tuesday a much wider-than-expected third-quarter loss. Revenue for the quarter also missed estimates. Just 19% of third-quarter transaction-based revenue of $267 million was from crypto trading, compared with 52% of $451 million in the second quarter. Analysts at Piper Sandler, while keeping a neutral rating on Robinhood stock, lowered their price target to $38 per share from $47 per share. They wrote the firm's "dependency on dogecoin in 2021 exposes short-term vulnerability." On Tuesday's earnings call, Robinhood CFO Jason Warnick acknowledged that a lack of a major market event like GameStop trading in the first quarter, or dogecoin's surge in the second quarter, contributed to the third-quarter loss. Warnick told investors on the call that Robinhood "decided as a company to be cautious about chasing growth with marketing dollars." CEO Vlad Tenev said the company will wait for more regulatory coherence in crypto before adding more digital coins to its current selection of seven coins on the service. "There was a tremendous burst of excitement, and a lot of the excitement had to do with GameStop and AMC , and then the money shifted toward crypto, mostly dogecoin," Cramer said. "Is the Robinhood revolution over?" the "Mad Money " host asked. "I think it's hit the pause button," until we see people come back to traditional equities.

Jim Cramer

Scott Mlyn | CNBC

CNBC's Jim Cramer said Wednesday he was depressed by Robinhood's third-quarter earnings call because it revealed the extent to which the newly public company relies on unpredictable crypto trading.