Morgan Stanley analyst Michael Cyprys initiated research coverage on Robinhood (NASDAQ:HOOD) shares at Equal Weight with a $15.00 per share price target.
The analyst is cautious on HOOD as he sees strong competition that will likely weigh on user growth. Moreover, 2022 is seen as a transition year.
HOOD has established a presence in the retail trading marketplace with a sleek and user-friendly mobile app offering free stock, options, and crypto trading. We see a significant opportunity for HOOD to grow with this ~150m Gen Y/Z demographic as they age into their prime earning and savings years. The financial super app the company envisions can offer a full suite of financial services products with significant revenue potential, just as SCHW has met the needs of the baby boomers and Gen X, Cyprys said in a client note.
Morgan Stanley projects the account growth at a 6% CAGR to 41 million by 2031 and a similar 6% CAGR through 2024, which is significantly below the Street consensus of 13%.
Overall, Cyprys is bullish on Robinhood's long-term potential and opportunity set but sees near-term challenges and limited visibility.
A higher interest rate environment reduces shareholder patience to wait for progress on growth and the path to profitability. HOOD went public in July 2021 at $38/share, and with the stock down ~80% from the August peak, we see sentiment skewing negative, though a $7/share cash pile provides downside support. However, tough comparisons loom over the next several quarters: Retail customer engagement in the markets has softened in the more challenging macro/geopolitical backdrop, pressuring account growth and transactional revenues, Cyprys concluded.
The set price target implies a near 6% downside compared to Tuesday's closing price.
By Senad Karaahmetovic