Goldman Sachs Group Inc analysts downgraded Robinhood Markets Inc (NASDAQ:HOOD) to Sell with a price target of $13, down from $15 (7.7% upside) less than a year after leading its initial public offering.
William Nance saw the softening retail engagement levels, particularly among the low-end consumer, continued weakness in account growth, and a narrow path to near-term profitability, likely limiting the stock's outperformance over the next twelve months.
In the near term, intra-quarter app download data suggests Robinhood's user growth has remained depressed.
Goldman joined JPMorgan Chase & Co, the other lead IPO bookrunner, in turning bearish on the free-trading app that rose to prominence during the peak of the pandemic as homebound people turned to online trading.
Nance saw an acceleration in user growth as a critical requirement for shares to re-rate higher. Beyond stocks, their cryptocurrency trading has "much better" economics, but the recent volume decline offset the tailwind.
Nance considered it a perfect storm for Robinhood shares with mounting losses, falling monthly active users, and average revenue per user.
Robinhood shares traded at a 70% discount on their IPO price and 84% below the record highs in August. Given its recent growth trends, Nance saw Robinhood unlikely to reach profitability in 2023.
BofA Securities reiterated an Underperform with a price target of $13 after attending Robinhood's 2022 Bitcoin conference in Miami, Florida. The pandemic-related tailwind reversal and lack of profitability till 2025 led to the re-rating.
Price Action: HOOD shares traded lower by 7.50% at $11.18 on the last check Friday.
