Robinhood Markets cut to Underweight at Atlantic on declining user base, activity

Robinhood Markets (NASDAQ:HOOD) stock is dropping 2.6% in Wednesday premarket trading after Atlantic Equities analyst John Heagerty downgraded the stock and crypto trading app to Underweight from Neutral on concerns about its rapidly declining number of users and average revenue per user. "With customers returning to pre-pandemic behavioral trends and a potential recession ahead, user engagement seems likely to decline further," Heagerty said in a note to clients. The analyst also pointed out that equity market slumps often lead to lower retail trading volumes and the regulatory threat to its pay-for-order-flow revenue is substantial. "Lastly, plummeting crypto valuations will have a direct impact on both volumes and order value," Heagerty said. He pares his revenue estimate by 10% for 2022 and by 25% for 2023 and now forecasts negative adjusted EBITDA through to 2025. Heagerty's Underweight call leans more bearish than the average SA Author's Hold rating and the average Wall Street