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Key Takeaways

• Robinhood Markets shares fell Thursday following a report that Morgan Stanley is planning to add cryptocurrency trading to its E*Trade platform.

• The online trading platform also said full-year expenses would be higher than previously expected because of costs related to the acquisition of TradePMR.

• The news offset better-than-anticipated profit and sales in the first quarter.

Shares of Robinhood Markets (HOOD) declined Thursday following a report that Morgan Stanley (MS) is planning to add cryptocurrency trading to its E*Trade platform. Robinhood could face increased competition if big banks make a push into crypto trading.

In addition, Robinhood said in its first-quarter earnings report Wednesday that its costs would be higher than first thought because of a recent acquisition, and warned of the potential impact of any Federal Reserve interest-rate cuts.

The company sees full-year adjusted operating expenses and share-based compensation of $2.085 billion to $2.185 billion, compared to its earlier estimate of $2.0 billion to $2.1 billion. It explained that was because of anticipated costs related to its acquisition of the custodial and management platform TradePMR, which closed in the first quarter.

CFO Jason Warnick also noted during Robinhood's earnings call that if the Fed cuts borrowing costs by 25 basis points, "the impact would be on a stand-alone basis about $50 million as a headwind" to net interest income, according to transcript provided by AlphaSense.

Robinhood Q1 Results Top Estimates

The news offset the company’s better-than-expected first quarter results. Robinhood reported earnings per share (EPS) of $0.37 on revenue that 50% year-over-year to $927 million. Analysts surveyed by Visible Alpha expected $0.32 and $915 million, respectively.

Despite today's 1.2% decline, Robinhood Markets shares are up about 30% year-to-date.

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