Goldman Sachs Group Inc. analysts downgraded Robinhood Markets Inc. to Sell with a price target of $13, down from $15 (7.7 percent 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 percent discount on their IPO price and 84 percent 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.