It looks like Robinhood (NASDAQ:HOOD) has just lost a big investor. A recent SEC filing shows that as of the end of Q3, Google’s parent company Alphabet sold its remaining position in the commission-free trading app. Alphabet had already gotten rid of the majority of its holdings earlier this year, but the complete cull will do nothing for sentiment.
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That is already rather low after the company’s recent Q3 report failed to please on most levels with shares shedding 14% in the immediate aftermath. In fact, the stock is now going for an 88% discount compared to the all-time high reached in 2021.
In the quarter, HOOD delivered revenue of $467 million, amounting to a year-over-year increase of 29.4% yet falling shy of expectations by $11.21 million, the miss driven by soft Transaction-based revenues of $185 million compared to the consensus estimate of $199 million. On the brighter side, adjusted EBITDA increased by 191% from the same period a year ago to $137 million, coming in ahead of the Street’s forecast by 13%.
However, that was not enough to satiate investors with Goldman Sachs analyst Will Nance attributing the share price drop to a combination of factors. These include: “1) a weaker outlook for NII in Q4, led by lower sec lending and client cash balances, 2) continued softening in retail trading trends in October into a seasonally weaker holiday period and 3) 4Q expense guidance was above expectations.”
Nevertheless, according to Nance, there are some silver linings to consider. There’s an anticipated European launch encompassing both brokerage and crypto services in the upcoming weeks. Additionally, the company has observed favorable trends in account growth, attributing it to the market disruption resulting from the Schwab/Ameritrade platform integration. This disruption could potentially contribute to an improved performance in the near-term.
“So looking forward,” Nance summed up, “while shares are cheap, in our view, and trading at just 1.4x TBV, we believe investors are looking for a re-inflection in account growth and improving activity levels to get more constructive.”
For now, then, Nance remains on the sidelines with a Neutral rating and $10 price target. Still, that figure makes room for 12-month returns of ~19%. (To watch Nance’s track record, click here)
Most on the Street’s agree with Nance’ stance. 6 other analysts join him on the fence and with the addition of 2 Buys and 3 Sells, the stock claims a Hold consensus rating. That said, most appear to think the shares are somewhat undervalued. Going by the $12.05 average target, a year from now, they will be changing hands for a 42% premium. (See Robinhood stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
