Robinhood Is Down By 7%, Here Is Why

Key Insights

• Goldman Sachs downgrades Robinhood due to slower user growth and weakening user engagement. 
• Analyst estimates have started to move higher but failed to provide any support to the stock.
• The rising interest rate environment will likely continue to put pressure on Robinhood shares. 

Robinhood Falls After Goldman Sachs Downgrade

Shares of Robinhood  gained strong downside momentum after Goldman Sachs downgraded the stock from Neutral to Sell.

According to Goldman Sachs, the company is facing weaker user growth, while user engagement is slowing down as well.

At the end of March, Robinhood announced that it would expand pre-market trading to 7 a.m. from 9 a.m. ET and after-hours trading to 8 p.m. ET. This announcement served as a major positive catalyst for the stock, which was up by 25% on the news.

However, the stock failed to develop additional upside momentum and found itself under significant pressure at the start of this month. Goldman Sachs’ downgrade served as an additional bearish catalyst and pushed Robinhood shares below the $11.50 level.

What’s Next For Robinhood Stock?

Analysts expect that Robinhood will report a loss of $1.25 per share in the current year and a loss of $0.67 per share in the next year, so the company is not expected to become profitable anytime soon.

It should be noted that analyst estimates have recently improved due to the company’s above-mentioned announcement. However, this improvement was not sufficient enough to provide any material support to the stock.

The yield of 10-year Treasuries has already reached the 2.70% level, and it has good chances to move closer to the 3.00% level amid high inflation. The rising interest rate environment is bearish for unprofitable companies, and it remains to be seen whether speculative traders will rush to buy Robinhood stock at current levels.

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