Robinhood Markets Inc (NASDAQ: HOOD) seems to have had its moment in the sun. The stock is down more than 50% from its IPO price, and BofA Securities doesn’t see much of a prospect for a near-term recovery either.
Robinhood initiated at ‘underperform’
BofA Securities’ Craig Siegenthaler assumed coverage of HOOD this morning with an “underperform” rating and a price target of $22 a share that does represent an about 20% upside from here but is still down roughly 70% from its year-to-date high.
According to Siegenthaler, it’ll be challenging for Robinhood to expand its market share in the near term, considering it already has 23 million accounts versus a total of 66 million adults in the United States aged 20-34, which the fintech company sees as its target market.
Despite a sharp decline in crypto activity on its platform in Q3, Robinhood continues to generate a significant chunk of its revenue from cryptocurrencies, which Siegenthaler says faces regulatory pressures.
What else could be a downside risk?
On top of it, Robinhood’s payment for order flow model is not very welcomed either and could be another downside risk in the future. Robinhood company generates up to 80% of its revenue from PFOF, so a crackdown could mean an unprecedented hit to the company.
On CNBC’s “Halftime Report”, Josh Brown also blasted Robinhood’s overstated growth trajectory as he agreed with the bearish call.
BofA reiterated what I’ve been saying since Robinhood went public. There’s nothing special about the company or what they do. They just happened to have had the perfect moment to capitalize on, and all of that is in the past, never to be repeated again. So, I still wouldn’t buy it down here.
Up until last month, billionaire investor Kevin O’Leary was still bullish on HOOD.
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