Shares of online brokerage Robinhood Markets (NASDAQ: HOOD) jumped as much as 17.4% in trading on Wednesday after the company reported fourth-quarter 2023 financial results. Shares closed the day up 13%.
The big quarter
Revenue jumped 24% to $471 million in the quarter due to a 41% jump in interest revenue to $236 million and an 8% jump in transaction revenue to $200 million. Net income was $30 million, or $0.03 per share, from a loss of $166 million, or $0.19 per share a year ago.
Analysts were only expecting revenue of $457 million and a loss of $0.01 per share, so results easily topped estimates.
In 2024, management expects operating expenses to fall from $2.4 billion to between $1.85 billion and $1.95 billion.
The big question for Robinhood
The improvements in the business are positive, but Robinhood's total operating expenses for 2023 were still 130% of total revenue. That's not a way to make a profit even if a business is growing.
On top of that, dilution is a very real problem, with $871 million in stock-based compensation given out in 2023. This kind of compensation has a very real cost for the business and will dilute shareholders if the value of the company goes up.
While I like the results, I don't think this is fundamentally a company that's proven the ability to operate profitably long-term, so I will sit out for now and wait for the operating expenses and stock-based compensation to come more in line with revenue.
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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
