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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 behavioural 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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