Despite Robinhood getting more skepticism from Wall Street analysts, famed stock-picker Cathie Wood of Ark Invest recently increased her stake in the wildly popular app for trading stocks, and shares fell over 10% in the past week following a significant report third-quarter revenue decline.
Robinhood shares Robinhood which went public to great excitement in July, are now down 12 percent–well below the IPO price of $38 since reporting poor third-quarter earnings in the evening on Tuesday. Cathie Wood, the founder, and chief executive officer of the $75 billion asset management company Ark Invest, purchased a total of 2.24 million shares of Robinhood in different funds on Wednesday, an investment of around $80 million at that time.
The innovator investor is firmly bullish on Robinhood and has bought the decline in the shares despite the company’s colossal revenue deficit that was due in large part to the drastic drop in crypto trading through its platform as well as a slowdown in user growth.
Wood added to her holdings in Robinhood. She’s been buying most of the shares in her most popular fund, the ARK Innovation ETF, even when Wall Street analysts grew increasingly pessimistic about the company after the company’s disappointing earnings report.
Analysts across the board cut their price expectations on Robinhood on the last trading day, including JPMorgan, Goldman Sachs, Piper Sandler, Barclays, and Deutsche Bank.
According to experts, investors are increasingly worried that, if there aren’t any significant market events, like the GameStop explosion at the beginning of the year or Dogecoin during the 2nd quarter –Robinhood’s revenue and trading activity is likely to continue to take the brunt of.
Robinhood’s earnings revealed that more users opted out of their accounts or were able to sell assets than opened new accounts in the third quarter, which is an alarming sign for a business that saw a massive increase in user numbers in the year 2020 and the first, second half of 2021. The monthly active users fell to 18.9 million, down from 21.3 million in the previous quarter according to Robinhood as well as the total amount of funds in accounts decreased by 22.5 million down to 22.4 million. There are sure signs that users could have left the platform and shifted to rivals like Fidelity or Schwab, which could be the reason for the slowing in account growth. In the last few weeks, there have been many posts on finance Reddit forums, where users have posted photos of themselves leaving Robinhood to join a different brokerage.
While Wood has been building an equity position in Robinhood since the company went public in July, the company is only 1.33 percent of her principal Ark Innovation ETF.
Despite some reservations at times from Wall Street, Wood’s strategy focuses almost exclusively on “disruptive innovation.” As she said to Forbes this week, she is incredibly enthusiastic about cryptocurrency, insisting that regulations won’t hinder technological innovation. Wood also purchased the dip in Twitter shares on Wednesday, acquiring the value of her position to $60 million. The stakes in the online social network giant dropped nearly 11% following the company’s earnings revealed a slowdown in the development of its users.
