Robinhood reports fourth-quarter earnings on Thursday, and the out-of-favor stock could rebound a bit if it managed to add a big number of new clients at the end of 2021. The brokerage will report its results after the bell. All eyes will be on Robinhood's account growth, the strength of the trading platform's cryptocurrency business after a disappointing third quarter and new initiatives like crypto wallets . Shares of Robinhood have been punished in recent months. As of Wednesday's close, the stock is more than 85% off its most recent high since the trading app's July 2021 public debut . Shares are down more than 30% in January, dropping its market capitalization to the $10 billion range. "We believe recent performance sets a relatively low bar, and if the company can return to positive account growth, shares could be poised for a relief rally," said Will Nance, analyst at Goldman Sachs. Net cumulative accounts edged down to 22.4 million in the third quarter from 22.5 million in the previous quarter. Investors will be looking for client acquisition growth in the upcoming results. While the company also faced a major trading slowdown from its record activity at the start of 2021, Devin Ryan of JMP Securities said Robinhood's fundamentals are pretty consistent with when the brokerage went public. "The actual story itself has not changed as much as the stock has," he said. Ryan said a lack of liquidity when the company went public, as well as the recent carnage in growth stocks, have contributed to weakness in the share price. Plus, the announcement of a data security incident in November has not been helpful in reinforcing its safety-first ethos. "The quarter is pivotal because sentiment has soured and people are focused on the past," said Ryan. "Robinhood really needs to tell a story around innovation for the future, and 2022 should be a record year for that." The numbers Robinhood said it expects fourth-quarter revenue no greater than $325 million, which many analysts on Wall Street find conservative. Third-quarter revenue totaled $365 million. Wall Street is forecasting a loss of 45 cents per share for Robinhood, according to Refinitiv. Analysts predict revenue of $362.1 million. "We see a 4Q beat, as we believe the company set very conservative guidance for 4Q21, and given improved retail activity rates as well as higher crypto volumes," said Nance. Goldman has a neutral rating on Robinhood. JMP Securities also expects slight revenue growth, compared to the 10% revenue decline that Robinhood forecasted. "Over the coming quarters, HOOD will face its most difficult compares. Once this and overhang from possible regulatory scrutiny around [ payment for order flow ] get resolved, HOOD could see a nice rebound," said Dan Dolev, analyst at Mizuho. Crypto and innovation Investors will also be monitoring Robinhood's crypto-trading segment, which quickly became the brokerage's biggest revenue source after going public. Crypto-based revenue fell to $51 million in the third quarter, from $233 million in the second quarter. The slowdown iwas largely due to meme-inspired dogecoin falling out of favor. Some analysts see Robinhood's crypto wallet — which the brokerage is testing — could help the app's crypto business. The wallet will allow investors to trade, send and receive digital currencies, as well as move them in and out of the Robinhood app. "We believe a successful launch of their crypto wallet can jump-start their crypto-trading volumes," said Richard Repetto of Piper Sandler. Since going public, Robinhood has emphasized that it is devoting resources toward innovation. The company has increased its headcount tenfold over the last few years. "Their infrastructure and their ability to innovate and launch new products is dramatically better than it was a couple years ago," said Ryan. Wall Street is simply hoping for a peek into the upcoming product development before it can reward the stock. — with reporting from CNBC's Michael Bloom.
Vlad Tenev, CEO and co-founder Robinhood Markets, Inc., is displayed on a screen during his company’s IPO at the Nasdaq Market site in Times Square in New York City, U.S., July 29, 2021.
Brendan McDermid | Reuters
Robinhood reports fourth-quarter earnings on Thursday, and the out-of-favor stock could rebound a bit if it managed to add a big number of new clients at the end of 2021.