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Robinhood Markets (NASDAQ:HOOD) stock is slipping 1.5% in Tuesday midmorning trading after JMP analyst Devin Ryan pointed out that complications that FTX would have in acquiring the stock and crypto trading app.
Meanwhile, Morgan Stanley analyst Michael Cypris see a wide range of potential value for the fintech given its "lack of profitability and challenging outlook." (Added at 10:44 AM ET)
On Monday, Bloomberg reported that FTX, the crypto exchange owned by Sam Bankman-Fried, is having internal discussions about whether it should pursue and acquisition of Robinhood (HOOD).
"Conversations appear to be extremely preliminary, and while they could progress, we currently view a sale as a relatively low probability and we believe a fire-sale price is off the table," Ryan wrote in a note to clients.
HOOD's ownership structure poses a major obstacle, the analyst noted, with co-founders CEO Vladimir Tenev and Chief Creative Officer Baiju Bhatt holding 63.5% of voting power through their ownership of class B shares, which give them 10 votes per share.
Ryan also doesn't see pressure for Robinhood (HOOD) to sell. "Robinhood is far from a position of desperation and we believe has ample cash to ride out an extended bumpy period (much more than most)," he said.
He's not surprised by FTX's interest in the fintech, given tis customer base of 22.8M net cumulative funded accounts. And cumulative net deposits have increased at ~30% annualized rate in 2022, through May, he said.
Ryan has a Market Outperform rating on Robinhood (HOOD) and a price target of $36 (vs. $9.12 closing price on Monday).
Morgan Stanley's Cyprys, who has an Equalweight rating on Robinhood (HOOD), sees a valuation range of $4.3B-$47B for the business, implying a $5-$54 per share price based on previous transactions. He sees the company's value mostly derived from its large user base with attractive demographics. (Added at 10:44 AM ET)
Last month, CNBC reported that Bankman-Fried's FTX was looking for brokerage startups to acquire. He had also taken a 7.6% stake in HOOD in May.
On Monday, Goldman Sachs upgraded HOOD to Neutral due to more balanced risk-reward after the stock's recent weakness