Key points:
- HOOD stock trades down 5.7% on downgrade from Goldman Sachs
- The rollout of crypto wallets might have limited effect on clawing back revenue and user growth
- Goldman Sachs analyst Will Nance cites a “limited path to near term profitability”
Robinhood (NASDAQ: HOOD) hasn’t had quite the market debut it wished for. Since the company's IPO, the stock has lost over 65% of its value; the company has simply misjudged its share of the trading market, revenue avenues, and consumer satisfaction. The hype that led up to Robinhood’s public listing was short-lived and quickly gave way to worries surrounding revenue growth and slowing client additions.
The company had a net loss of $423M on revenue of $362M in Q421, with investors looking dubiously at an 8% drop in active users from Q3. Management’s outlook wasn’t much better, stating that March revenue would likely fall below $340M due to lower equity and cryptocurrency trading volumes.
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Despite plans to aid revenue growth by extending its trading day from 7:00 am Eastern to 8:00 am Eastern, supported by further plans to introduce 24-hour trading. However, the question remains as to how much this will ease stronger headwinds. Today, the company has announced the rollout of its Crypto Wallets for everyone eligible on the WenWallets waitlist; unveiling wide access to a larger number of cryptocurrencies.
Goldman Sachs analyst Will Nance doesn’t see the promise in Robinhood’s current trajectory, degrading the stock to Sell from Neutral. The analyst points to waning engagement from retail traders, weakness in account growth, and what he calls “a limited path to near term profitability”. Recent data shows a clear downtrend in app downloads, suggesting a daunting growth trend. Acceleration of user growth is a critical metric for investors, and the company’s new Crypto Wallets might have a limited effect on welcoming the number of new users required. HOOD stock currently trades at a daily loss of 5.7%.
