According to Will Nance, who upgraded Robinhood (HOOD) from a Sell to a Neutral recommendation on Monday, the company’s current price puts it “close to its cash worth.”
As interest rates rise quicker than projected, Robinhood will gain, according to the analyst. An additional $549 million may be added to adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization, by a 3.5 percent change in interest rates, he says.
HOOD’s net interest income from balance sheet cash, margin loans, bank sweep, and client payables, he said in a research report, “would gain from additional rate rises”
Nance also noted that since the early 2021 meme stock trading boom, levels of involvement, as assessed by overall trading volumes, had mostly normalized. According to the CEO, the firm is also adopting cost-cutting measures that might lead to higher profits.
Because of the impact on margins and active users caused by the fall in retail trade, Nance feels that the fundamentals of Robinhood “remain quite bad.” In light of the current situation, the analyst cut his price estimate from $11.50 to $9.50.
One-third of Wall Street analysts recommend buying Robinhood, while the other half recommend holding on to their positions, and the remaining 20% recommend selling the company. Amid worsening market circumstances and dropping cryptocurrency values, Atlantic Equities downgraded the stock from Neutral to Underweight in mid-June.
In premarket trading on Monday, Robinhood stock rose 2.5% to $8.20. This year, the stock has lost 55% of its value.