Sell Robinhood Stock on Crumbling Crypto and a Falling Market, Says Analyst

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Atlantic Equities downgraded Robinhood Markets stock to Underweight from Neutral.

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Robinhood Markets shareholders should brace for more pain ahead, according to Atlantic Equities.

On Wednesday, analyst John Heagerty lowered his rating for the retail trading brokerage to Underweight from Neutral, citing weakening market conditions.

“We are increasingly concerned about the deteriorating revenue trends facing Robinhood (ticker: HOOD ),” he wrote. “With customers returning to prepandemic behavioral trends and a potential recession ahead, user engagement seems likely to decline further.”

The S&P 500 has declined about 20% this year, while the price of Bitcoin is down about 55% in the same time period.

Heagerty said retail trading volume tends to fall after periods of negative market volatility. With the general stock market and cryptocurrency prices down significantly, he expects Robinhood customer activity to suffer later this year.

“Plummeting crypto valuations will have a direct impact on both volumes and order value,” he wrote.

As a result of the softening trends, the analyst lowered his revenue forecasts for Robinhood by 10% for fiscal 2022, and by 25% for fiscal 2023.

It’s already been a tough year for Robinhood investors. The stock has tumbled about 60% year to date to $7.03. Heagerty’s new stock price target of $5 predicts further downside for the company’s shares.

Robinhood declined to comment on Atlantic Equities’ analysis on deteriorating activity and falling crypto prices, citing the company’s quiet period.

Write to Tae Kim at tae.kim@barrons.com