Robinhood to Cut Jobs by 9%; Shares Down 5%

Shares of Robinhood (NASDAQ: HOOD) were down more than 5% during the extended trading session on April 26, after the American financial services and brokerage company revealed that it plans to execute a 9% cut in full-time jobs.

This comes as a sharp contrast to the significant headcount expansion made by the company over the past two years.

Details

In a blog post, Robinhood CEO, Vlad Tenev, said that the company expanded its headcount almost six times, from 700 to nearly 3,800 during the pandemic years of 2020 and the first half of 2021.

The expansion was meant to meet robust demand triggered by lockdowns, low-interest rates, and government stimulus. However, the supernormal growth in headcount led to “duplicate roles and job functions.”

Therefore, the company decided to slash the jobs with an aim to improve overall efficiency and adjust to the changing needs of its customers.

As of December 31, Robinhood reported 3,800 full-time employees. The company is scheduled to release its first-quarter earnings after the market closes on April 28.

CEO Comments

Robinhood CEO, Vlad Tenev, commented, “While the decision to undertake this action wasn’t easy, it is a deliberate step to ensure we are able to continue delivering on our strategic goals and furthering our mission to democratize finance.”

He further added, “We will retain and continue to hire exceptional talent in key roles and provide additional learning and career growth opportunities for our employees. And of course, our international expansion efforts will continue to accelerate from here.”

Wall Street’s Take

Yesterday, Mizuho Securities analyst Dan Dolev reiterated a Buy rating on the stock with a price target of $19 (90% upside potential).

Consensus among analysts is a Hold based on four Buys, five Holds, and three Sells. The average Robinhood Markets stock forecast of $17 implies 70% upside potential to current levels.

TipRanks’ Stock Investors’ tool

TipRanks’ Stock Investors tool shows that investors currently have a Very Negative stance on HOOD, with 1.2% of investors decreasing their exposure to HOOD stock over the past 30 days.

Conclusion

The CEO reassured investors that the company continues to exuberate a strong financial position with $6 billion liquidity on the balance sheet. He sounded optimistic with future plans to accelerate product momentum throughout 2022 with the introduction of key new products across Brokerage, Crypto, and Spending/Saving.

However, the share price movement has a different story to tell. Since the company’s IPO listing in July 2021, shares are down 71.55%. Further, they are trading around $10, much below the IPO price of $38.

Job cuts imply a red flag and investors should keep a close watch on the stock.

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