Robinhood Stock Price Down 32% in 2022 – Time to Buy HOOD Stock?

Growth stocks have been under severe pressure this year. While the US stock markets have bridged their 2022 losses, some of the growth names are still down sharply. Despite bouncing from its lows, Robinhood (HOOD) stock is still down 32% for the year.

It was among the most hyped IPOs of 2021 but eventually priced the IPO at $38, which was the low end of the price range. Robinhood did not have a good listing and soon the stock fell below the IPO price. However, there was a buying spree thereafter and the stock went as high as $85. The stock could not sustain those price levels and has been falling over the last few months. HOOD stock now trades 86% below its 52-week highs. What’s the forecast for the stock and should you buy the dip?

Robinhood stock recent developments

Robinhood has been looking at ways to increase its revenues. It has increased the extended hours trading time on the platform and is advocating round-the-clock trading in US stocks. The announcement led to a rise in the HOOD stock as more trading would mean more revenues for the popular trading app.

Also, the company has now extended its crypto wallet to all the customers on its platform. The company sees cryptos as a key driver and is looking to add more cryptos as well as crypto-related services like lending and staking to the platform.

68% of all retail investor accounts lose money when trading CFDs with this provider.

Crypto revenues

The company’s crypto revenues peaked at $223 million in the second quarter of 2021 amid frenzied trading in Dogecoin. As the meme cryptocurrency fell out of favor with traders, Robinhood’s crypto revenues nosedived to $51 million in the third quarter and fell further to $48 million in the fourth quarter of 2022. Several Shiba Inu fans, which became popular at Dogecoin’s expense, petitioned HOOD to add SHIB to the platform but the company did not relent. The limited availability of digital assets on Robinhood’s platform is a key hindrance to scaling up the revenues.

Robinhood’s revenues have been falling

Robinhood reported revenues of $363 million in the fourth quarter of 2021 which were similar to what analysts were expecting. It posted a net loss of $423 million in the quarter which was slightly ahead of estimates.

The company reported monthly active users of 17.3 million in the quarter, which was below the 18.9 million that it reported in the third quarter. It had a total of 22.7 million funded accounts at the end of the quarter, which was slightly ahead of the 22.4 million that it reported at the end of September.

HOOD provided bleak guidance for the first quarter of 2022

HOOD expects its revenues to be below $340 million in the first quarter of 2022, which would mean a YoY fall of 35%. Here it is worth noting that HOOD is facing tougher YoY comps in the first half of 2022. However, the guidance nonetheless spooked markets and the stock tumbled after the earnings release.

Analysts have been mixed on Robinhood

Wall Street analysts have been quite mixed on Robinhood stock. Today, Goldman Sachs downgraded the stock from neutral to sell and assigned a target price of $13. “We believe softening retail engagement levels (particularly among the low-end consumer), continued weakness in account growth, and a limited path to near term profitability are likely to limit outperformance over the next twelve months,” said Goldman Sachs’ analyst Will Nance.

Nance added, “Intra-quarter app download data suggests user growth has remained depressed, and we see an acceleration in user growth as a key requirement for shares to re-rate higher.” He also said that the company’s earnings estimates look aggressive and expressed doubt over its ability to turn profitable next year.

JMP meanwhile reiterated its overweight rating on HOOD stock and was impressed with the launch of its debit card ahead of time. However, generally, analysts have been slashing Robinhood’s target price over the last four months.

Robinhood stock forecast

Of the 16 analysts covering the stock, five have a buy rating while nine have a hold rating. Two analysts have a sell rating. Its median target price of $15 is a 24% premium over current prices. The street low target price of $11 is a discount of 9% while the street high target price of $41 is a 239% premium.

HOOD stock long term forecast

Morgan Stanley believes that Robinhood’s long-term forecast looks bullish even as the brokerage does not see it moving much higher in the short term. “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,” said Morgan Stanley analyst Michael J. Cypry in his note.

He added, “The financial ‘super app’ the company envisions can offer a full suite of financial services products with significant revenue potential, just as SCHW [Schwab] has met the needs of the baby boomers and Gen X.”

Robinhood is working on several new products to increase its wallet share from existing investors. It is working on offering IRA and other serious financial products. However, it would need to shed its reputation of being a “fun trading app” to succeed in other financial products.

 Should you buy Robinhood stock?

Robinhood is among the worst-performing IPOs of 2021. The company faces several challenges including the SEC’s scrutiny of the order flow mechanism, from which HOOD gets most of its revenues.

However, it now trades at an NTM (next-12 months) price-to-sales multiple of just about 5.8x. The stock could see more selling pressure in the short-term looking at the general weakness in US stock markets. However, if you can be greedy when the markets are fearful, HOOD stock could be for you.

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