A recovery for Robinhood may not be in the cards anytime soon, according to Atlantic Equities. Analyst John Heagerty on Wednesday downgraded the online brokerage to underweight, saying a decline in user engagement — combined with falling trading volumes, potential regulation around the payment for order flow business model and plummeting cryptocurrency valuations — will put even more pressure on the stock. “With customers returning to pre-pandemic behavioural trends and a potential recession ahead, user engagement seems likely to decline further,” Heagerty said. “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. As a result of our analysis we have lowered our revenues by 10% in 2022 and by 25% in 2023,” the analyst added. Robinhood shares have fallen more than 59% this year, far more than the Nasdaq Composite and S & P 500 — which are down 30.8% and 21.6%, respectively. In late April, the company reported first-quarter results that were well below analyst expectations, with monthly active users declining to 15.9 million from 17.7 million in the year-earlier period . The company also cut about 9% of its workforce , citing “duplicate roles and job functions” for the layoffs. Atlantic Equities has a price target of $5 per share on Robinhood, about 30% below Tuesday’s close of $7.23. “Overall, the threats to Robinhood’s revenues are substantial and the increasing possibility of a recession will continue to apply pressure to revenues through declining valuations and decreasing volumes,” Heagerty said.
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