Robinhood’s (HOOD) Crypto Revenue Miss Tempers Solid Quarter: JPMorgan

Wall Street bank JPMorgan (JPM) called Robinhood’s (HOOD) third-quarter results solid but lower quality, as weaker crypto revenue and tax benefits drove much of the earnings beat.

The bank said the roughly 15% earnings per share (EPS) beat was mostly due to a lower tax rate tied to stock-based compensation from the 52% rise in the share price, in a report published Thursday.

Analysts led by Kenneth Worthington expect the trading platform’s margins to keep improving and raised their price target on the shares to $130 from $122, while reiterating their neutral rating on the stock.

The shares slumped 11% yesterday, closing around $127.

Crypto was the main drag, with net revenue of $268 million missing both Street and JPMorgan estimates, sending shares lower despite strong volume growth.

The bank said Robinhood’s crypto fee rate slipped to 67 basis points from an expected 68, as management continues to adjust pricing.

Prediction markets offset some weakness, though the analysts cautioned that the segment depends on a small group of active traders.

Read more: Wall Street Divided on Coinbase’s Path Forward After Q3 Earnings Beat