Robin hood ((((Hood -1.27%). When Coinbase ((((coin -1.88%). Both were once considered destructive fintech companies. Robin Hood challenged traditional brokerage firms with no fees for equities, exchange-traded funds (ETFs), options, and cryptocurrencies. Coinbase has emerged as one of the largest cryptocurrency exchanges in the world.
But today, Robin Hood is more than 70% below the IPO price of $ 38 per share since August last year. Coinbase, which started trading at $ 381 per share after being listed directly in April last year, is now more than 80% below that price.
Let’s see why these two FinTech darlings have been crushed, and whether investors should consider either unfavorable stock as a turnaround play.
Image Source: Getty Images.
A trio of unusual tailwinds
Robin Hood and Coinbase benefited from three extraordinary tailwinds in 2020 and 2021. First, with the COVID-19 pandemic, people stayed home and actively traded more stocks, options and cryptocurrencies. Second, many of those investors have invested in these trading platforms using federal stimulating checks.
Finally, many private investors have invested cash in high-value stocks and cryptocurrencies rather than more conservative investments. Reddit-fueled rallyMeme stock,“The soaring cryptocurrencies and bullish comments from well-known growth investors like Cathie Wood also triggered the FOMO (” FOMOFOMO “) rally that lasted until late 2021.
As a result, both Robin Hood and Coinbase experienced explosive growth in 2021. Robin Hood’s monthly active users (MAU) increased 48% to $ 17.3 million, and Robin Hood’s revenue increased 89% to $ 1.82 billion. Coinbase’s revenue increased 545% to $ 7.36 billion, with monthly maximum transmission unit (MTU) increasing 307% to 11.4 million.
Speculative bubble bursts
But over the last six months, inflation and rising interest rates have created that speculative bubble. These macroeconomic headwinds have led investors to dump higher-risk assets such as meem stocks and cryptocurrencies and buy more conservative investments. Inflation headwinds have also forced private investors to save cash instead of putting it on the market, and the lack of new stimulus has exacerbated the slowdown.
Looking at the price of GameStop ((((GME -3.56%)., AMC ((((AMC -8.03%)., Bitcoin ((((BTC 0.59%).When Ethereum ((((ETH 0.56%). This year, we can see why investors have lost so much of their desire for memetic stocks and cryptocurrencies.
Source: Y Charts
As a result, both Robin Hood and Coinbase are facing a severe slowdown this year.In First quarter of 2022Robin Hood’s MAU decreased by 10% year-on-year and gradually decreased by 8% to 15.9 million. Average revenue per user (ARPU) was $ 53, down 61% year-over-year.
Analysts expect Robin Hood’s revenue to decline 16% to $ 1.52 billion for the full year. EBITDA (Interest, taxes, depreciation, and income before depreciation) will result in a loss of $ 34 million to $ 328 million. It is also expected to remain unprofitable under generally accepted accounting principles ()GAAP) Base, net loss of $ 1.3 billion.
Coinbase’s MTU increased 51% year-on-year to 9.2 million. First quarterHowever, it has decreased by 19% in a row since the fourth quarter of 2021. It is expected to be at the end of the year at 5 to 15 million MTUs, depending on the market’s desire for cryptocurrencies, but the wide range will be 56% to 32 year-on-year. Year-on-year growth rate.
Coinbase’s own expectations are ambiguous, but analysts’ consensus expectations are that this year’s revenues will fall 41% to $ 4.7 billion as adjusted EBITDA reverses from $ 4.1 billion to a loss of $ 151 million. Is to be. They also expect it to record a $ 1.7 billion GAAP loss.
The outlook for Coinbase’s management is even bleak. The company expects annual adjusted EBITDA losses to be “about $ 500 million” to withstand “long-term stressful scenarios.”
Evaluation and verdict
Robin Hood and Coinbase seem unattractive in this tough market for tech stocks. Both companies may face significant regulatory headwinds in the future as the Securities and Exchange Commission scrutinizes Robin Hood’s order flow payments (PFOF) Model the cryptocurrency market and impose new regulations.
That said, Robinhood and Coinbase still look fundamentally cheap, about six and four times the sales forecast for this year, respectively. These low-price-to-sales ratios can seduce the acquisition goals of banks, brokerage firms, or various fintech companies.
I personally don’t bet on either stock as a turnaround play so far. But if you have to choose between them, buy Robin Hood. This is because Robin Hood is more widely diversified and is not betting entirely on cryptocurrencies. If you want to increase your exposure to cryptocurrencies, just buy Bitcoin or Ethereum instead of investing in Coinbase’s capital-intensive business.
