Why Is Robinhood (HOOD) Stock Falling Today?

Robinhood (NASDAQ:HOOD) stock is down nearly 2% today after the retail brokerage announced that it is cutting 9% of its workforce.

Source: OpturaDesign / Shutterstock.com

News of the staff cuts comes the day before Robinhood is scheduled to issue its first-quarter earnings on April 28. It has shaken confidence in analysts and investors who see the employee reductions as a sign that the company's financial situation is likely deteriorating.

So far this year, HOOD stock has declined 45% to trade at $9.80 per share.

What Happened With HOOD Stock

The company announced in a blog post, which CEO Vlad Tenev authored, that it is eliminating 9% of its full-time employees. Robinhood reported having 3,400 full-time employees earlier this year. In its blog post, Robinhood cited that its staff had grown from 700 to 3,800 over the course of the pandemic.



The online brokerage is scheduled to release its first-quarter results after markets close tomorrow. While the blog post didn't mention the company's upcoming financial results, other than to say it has $6 billion of cash on hand, expectations are that Robinhood will report disappointing results.

Why It Matters

Robinhood's business and stock have been in steep decline since the company went public last July. In its previous financial results for the fourth quarter, Robinhood reported a net loss of $423 million, or 49 cents loss per diluted share. At the time, Wall Street was looking for a loss of 45 cents per share.

Robinhood also reported that monthly active users on its trading platform fell to 17.3 million in Q4 2021 from 18.9 million in the third quarter of last year. This number was also below analyst estimates of 19.8 million. For its first-quarter results that it will report tomorrow, Robinhood forecast revenue of $340 million, down 35% compared with the year-earlier period. HOOD stock fell 15% the day after the company's last earnings and guidance.

Robinhood gained notoriety in early 2021 as a key player in the GameStop (NYSE:GME) short squeeze saga. In fact, many analysts and lawmakers blamed Robinhood for encouraging the meme stock rally of 2021. However, Robinhood's fortunes have turned negative as the meme stock rally has fizzled.

What's Next for Robinhood

Investors are bracing for an ugly first-quarter print from Robinhood after the stock market closes tomorrow. Many investors are trying to get ahead of the curve and preemptively selling their HOOD stock today. Should Robinhood's quarterly results miss by a wide margin, the selloff in the company's shares can be expected to worsen.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.  The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com  Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.