Citi Downgrades Robinhood’s Stock From Buy to Neutral

• The analyst said the timeline is “uncertain” at this point.
• Shares of HOOD had their price objective cut by Christopher Allen and Ygal Arounian.

Robinhood Markets (HOOD) stock was downgraded from “Buy” to “Neutral” by Citi because of uncertainty surrounding the United States Securities and Exchange Commission’s (SEC) upcoming market structure proposals. Along with Citi’s cautious equity market outlook, and the effect of the collapse of FTX, a cryptocurrency trading platform, on Robinhood Markets’ revenue and customer base.

The analyst said the timeline is “uncertain” at this point. The collapse has also eliminated it as a potential Robinhood buyer. Shares of HOOD had their price objective cut by Christopher Allen and Ygal Arounian of Citi to $10 from $11.

Many things have gone well for Robinhood, according to a new report from the company’s analysts. These include a much-reduced cost base, enhanced active trader capabilities, and the introduction of enticing new products. However, they reported a nuanced view in the short term and listed various possible consequences for Robinhood after FTX’s tragic collapse.

Tough Times Ahead

As another example, Citi discussed the “potential liquidation of 56.3 million HOOD shares (7.4% of outstanding)” held by Sam Bankman-Fried, the arrested former CEO of FTX, via Emergent Fidelity Technologies.

After a drop of around the same magnitude this year, the two predict that Robinhood’s crypto trading income would fall by almost 50% in 2023. Recent reports have shown a somewhat steady outlook for its equities business, but given the volatile market trend, this may not materialize. However, Allen is optimistic about options trading.

The analysts see a fair risk/reward in the immediate future for Robinhood investors, but they are optimistic about the company’s future prospects because of its “solid balance sheet, monetization of account growth potential, and brand recognition.”

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