3Q23 net revenues miss, MAU is still declining
- 3Q23 net revenues, affected by a slowdown in trading activity, fell short of market expectations.
- Monthly active users remained on downtrend (-16% y-o-y), and net deposits slowed sequentially
- Maintain a neutral stance on the long-term outlook; Maintain HOLD with TP slightly lowered to US$10
Net revenues miss with MAU keeps falling. 3Q23 net revenues were up 29% y-o-y / down 4% to US$467m, 2.3% below market consensus. Transaction revenue was down 4%, mainly dragged by weaker crypto trading activities. Net interest revenue was up 7% q-o-q as interest yield edged up further for both margin book and cash. Adjusted OPEX, excluding one-off events such as 2021 Founders Award Cancellation and legal & tax settlements, was down 1% q-o-q. Adjusted EBITDA was down 9% q-o-q as a result. Monthly active users (MAU) continued to drop to 10.3m (-16% y-o-y) and net deposits slowed to US$4.0b (annualised growth rate fell from 21% in 2Q to 18%). The company also expects a sequential decline in trading volume and interest revenue in 4Q23 due to more holidays.
Remain neutral due to lack of catalysts. The market rally during May-Jul23 has not reversed the structural downtrend in MAU, which reached a new low level in Sept. This is largely in-line with our previous view, as more mass retail investors would rather keep their assets at deposit account than actively trade. On the other hand, the short-term interest rates are near their peak so the boost to Robinhood’s interest income should almost come to an end too. We still think Robinhood is edging to GAAP breakeven / profitability next year, but the prolonged high interest rate should weigh on the MAU, client acquisition and hence the long-term growth trajectory. Maintain HOLD with TP slightly lowered to US$10, reflecting the weaker growth outlook.