Atlantic ‘Increasingly Concerned’ About Robinhood’s Revenues, Cuts to Underweight By

Atlantic ‘Increasingly Concerned’ About Robinhood’s Revenues, Cuts to Underweight

By Senad Karaahmetovic

Atlantic Equities analyst John Heagerty downgraded Robinhood Markets (NASDAQ 🙂 to Underweight from Neutral as he is “increasingly concerned about the deteriorating revenue trends” facing the company.

Heagerty’s move comes as Robinhood faces a rapid decline in monthly active users (MAUs), as well as falling average revenue per user (ARPU).

“With customers returning to pre-pandemic behavioral trends and a potential recession ahead, user engagement seems likely to decline further. In addition, the decline in equity markets is typically a prelude to lower retail trading volumes and the regulatory threat to PFOF revenues is substantial. Lastly, plummeting crypto valuations will have a direct impact on both volumes and order value, ”Heagerty told clients in a note.

These concerns have prompted the analyst to cut revenues by 10% in 2022 and by 25% in 2023 with the company unlikely to become profitable before 2025.

“The extended duration to achieving EBITDA profitability substantially lowers our DCF-based valuation. In addition, our revenue-based and NTA-based valuations are considerably lower than previously with downside risk to our revenue forecasts, ”he added.

The price target goes to $ 5.00, signaling around 30% downside from current market levels.

Robinhood shares are down nearly 3% in pre-market Wednesday.

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