Retail-focused trading platform Robinhood (NASDAQ:HOOD) could become the next casualty in the fast-spreading FTX contagion as CitiGroup downgrades HOOD to a neutral stance from buy.
CitiGroup Downgrades HOOD to Neutral
Robinhood, which moved into crypto trading in 2018 amid the crypto bull run that started in late 2020, is experiencing how low the crypto market can get, worsened by its exposure to the collapsed crypto exchange.
In a research report released on Tuesday, December 13th, CitiGroup downgraded its Robinhood Markets (HOOD) rating to neutral from buy and cut its price target to $10 from $11. HOOD has fallen by 40% this year and more than 88% from its all-time high.
Is Robinhood Facing Possible Restructuring?
Robinhood’s trouble centers around its exposure to FTX, as Bankman-Fried took a 7.6% HOOD stake in May this year. CitiGroup also expects crypto uncertainty will weigh on the trading platform.
The claims of Robinhood becoming the next victim are strengthened by CitiGroup’s prediction that Robinhood’s trading revenue will drop over 50% next year after a more than 50% decline in 2022.
However, Robinhood has published some positive data points. Robinhood reported no significant activity decline since the FTX collapse and had a net deposit of $1.7 billion in November – a 28% annualized growth rate relative to October 2022 AUC.
On the Flipside
- Although the report from CitiGroup is predominantly bearish, the bank notes that Robinhood has $7 in net cash per share, which should support HOOD.
Why You Should Care
Robinhood’s published data points suggest that the trading platform could weather the storm and avoid becoming the next company on FTX’s butcher list.
Bankman-Fried’s HOOD acquisition is covered in:
Robinhood spikes 20% as FTX chief buys 7.6% stake – Ark Invest buys $3 million in Coinbase (NASDAQ:COIN) shares
The struggle of Robinhood is covered below:
Robinhood CEO Vlad Tenev Takes Blame As Company Cuts 23% Of Its Staff