Citi downgraded Robinhood Markets (HOOD) inventory to ‘Impartial’ from ‘Purchase’ on account of potential dangers from upcoming market construction proposals by the US SEC, a cautious fairness market outlook, and the affect of bankrupt-platform FTX spilling over the crypto buying and selling income and shopper base.
The analyst said that the timing of that’s “unsure.” It is usually vital to notice that the implosion has eliminated it from the record of potential Robinhood acquirers. Citi analysts Christopher Allen and Ygal Arounian slashed his value goal to $10 from $11 on HOOD shares.
Combined Outlook
In a brand new analysis report, the analysts wrote that Robinhood has gotten many issues proper, comparable to materially reducing the associated fee base, bettering energetic dealer choices, and rolling out engaging merchandise. However they described “a blended outlook” within the close to time period whereas detailing a number of “potential implications” for Robinhood stemming from FTX’s catastrophic collapse.
Citi additionally talked about the “potential liquidation of 56.3 million HOOD shares (7.4% of excellent)” owned by Sam Bankman-Fried – the disgraced chief of FTX – by way of Emergent Constancy Applied sciences.
The duo additionally expects Robinhood’s income from crypto buying and selling to say no by over 50% in 2023 after an analogous extent of stoop this yr. Whereas the newest report did forecast a steady outlook for its equities operations, important progress could not transpire given the uneven market development. Having stated that, Allen is bullish on the choices exercise.
Moreover, the analysts are additionally optimistic about Robinhood’s longer-term outlook citing the corporate’s “stable steadiness sheet, monetization of account progress potential, and model recognition, however near-term see(s) a steadiness danger/reward.”
Navigating By way of Chaotic Market
Earlier this yr, Bankman-Fried extracted a 7.6% stake within the buying and selling app price $648 million within the perception that the shares would “symbolize a sexy funding.” As his crypto trade slid into chapter 11, the founder’s Robinhood stake grew to become the largest liquid line merchandise on his steadiness sheet that he may probably promote.
In a bid to navigate by way of the turbulent yr, Robinhood introduced plans to put off 23% of its workers final month amid shrinking income and declining consumer numbers. Regardless of crypto going downhill, the corporate’s CEO Vlad Tenev was bullish on the asset class. Whereas talking at CNBC’s Squawk Field, the exec said,
“We nonetheless see alternatives with crypto. I feel particularly prospects have been on the lookout for regulated safer choices, significantly prospects within the US.”
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