Wall Street bank JPMorgan (JPM) called Robinhood’s (HOOD) third-quarter results strong but lower quality, as crypto revenue and weaker tax benefits drove much of the gains.
The bank said the roughly 15% increase in earnings per share (EPS) was primarily due to a lower tax rate tied to stock-based compensation due to the 52% rise in share price, in a report released Thursday.
Analysts led by Kenneth Worthington expect the trading platform’s margins to continue improving and raised their price target on the stock to $130 from $122, while reiterating their neutral rating on the stock.
Shares fell 11% yesterday, closing around $127.
Cryptocurrencies were the main drag, with net revenue of $268 million missing Street and JPMorgan estimates, sending shares tumbling despite strong volume growth.
The bank said Robinhood’s cryptocurrency commission rate fell to 67 basis points from the expected 68, as management continues to adjust prices.
Prediction markets make up for some weakness, although analysts cautioned that the segment relies on a small group of active traders.
Read more: Wall Street divided over Coinbase’s path forward after third-quarter earnings beat
