Robinhood stock slips after Morgan Stanley outlines near-term challenges
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Robinhood Markets (NASDAQ:HOOD) stock is dipping 3.7% after Morgan Stanley analyst Michael Cyprys said he sees near-term challenges for shares in the stock- and crypto-trading app and considers 2022 to be a transition year.
Note that many fintech names are also weak in late morning Monday trading. Dave (DAVE), -6.3%; SoFi Technologies (SOFI) -2.3%; Upstart Holdings (UPST), -2.3%;Block (SQ) -2.9%.
"Tough year-over-year comps against an inflationary backdrop with tightening monetary policy (are) all nonsupportive for retail (re)engagement," the analyst wrote in a note to clients.
"Investor sentiment skews cautious with debate centered around pace of user growth and ability to increase customer monetization with new products to inflect profitability," Cyprys said.
The firm recently initiated Robinhood (HOOD) at Equalweight, but is leaning bullish on its long-term potential. The company has "the opportunity to be for Gen Y/Z what SCHW is for boomers," he said.
Still, lack of profitability is a "key sticking point of concern for many, at this point in the cycle." Some investors compared Robinhood (HOOD) with where Charles Schwab (SCHW) was in the 1990s, when SCHW was a similar market cap to HOOD's current size. At that time, Schwab (SCHW) was profitable, but HOOD hasn't yet achieved that.
Cyprys pointed to key differences between the two. For one thing, trading commissions existed and were much higher in the '90s, and Schwab's (SCHW) cost base was as tech-focused then as HOOD's is now.
Both SA Authors and Wall Street analysts average a Hold rating on Robinhood (HOOD).
Meanwhile, Schwab (SCHW) stock is also falling — down 8.2% in late morning trading — as Q1 earnings disappointed.
Last week, SA contributor BOOX Research warned to watch for a leg lower into Q1 earnings. Taking an opposing view, SA contributor Gary Alexander said it's time to dive into Robinhood (HOOD) for the long haul.