Wall Street bank JPMorgan (JPM) called Robinhood's (HOOD) third-quarter results strong but of low quality, with lower crypto revenue and tax incentives giving a significant boost to profits.
The bank said in a report Thursday that the roughly 15% increase in earnings per share (EPS) was primarily due to lower tax rates on stock-based compensation due to a 52% increase in share price.
Analysts led by Kenneth Worthington raised their price target on the stock from $122 to $130, expecting the trading platform's margins to continue to improve, while reiterating their neutral rating on the stock.
Shares fell 11% yesterday, closing at about $127.
Net revenue of $268 million was lower than Street and JPMorgan forecasts, largely due to cryptocurrencies, and the stock fell despite strong volume growth.
The bank said Robinhood's crypto fee rate has fallen to 67 basis points from the expected 68 basis points as management continues to adjust pricing.
Analysts warned that the sector relied on a small group of active traders, but prediction markets compensated for some of the weakness.
Read more: After third-quarter profit beat, Wall Street is divided on Coinbase's future path
