Robinhood Analyst: Trading App Could Be Gen Z's Charles Schwab, But Faces These Near-Term Pressures

Zinger Key Points
  • The analyst expects Robinhood to grow accounts at 6% CAGR through 2024, below the consensus expectation of 13%, as competition likely weighs on user growth.
  • The average revenue per user will expand by $25 to $115 in 2024, roughly four times the consensus, Cyprys estimates. 

Robinhood Markets, Inc. HOOD shares rallied Tuesday after the trading app announced an extension of trading hours for customers.

The Robinhood Analyst: Morgan Stanley analyst Michael Cyprys initiated coverage of Robinhood with an Equal-weight rating and $15 price target.

The Robinhood Takeaways: Robinhood's customers are likely to expand their relationship with the trading app, as it has established a presence in the retail trading marketplace with a sleek and user-friendly mobile app, offering free stock, options and crypto trading, Cyprys said in a note.

Just as Charles Schwab Corporation SCHW has met the needs of the baby boomers and Gen X, Robinhood has appealed to the Gen Y/Z demographic, the analyst said.

Of the total 22.7 million accounts, about 57% or 13 million of Robinhood customers belong to the Gen Y/Z demographic, giving it a penetration of 9%, he said. 

"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." 

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Execution is key, according to the analyst. This would mean building out a broader set of offerings beyond trading to capture the Gen Y/Z market opportunity, he said. 

The analyst expects Robinhood to grow accounts at 6% CAGR through 2024, below the consensus expectation of 13%, as competition likely weighs on user growth.

The average revenue per user will expand by $25 to $115 in 2024, roughly four times the consensus, Cyprys estimates. 

"2022 is a transition year where we need new product introductions to increase our conviction that HOOD can realize its potential." 

Morgan Stanley said it sees near-term challenges and lack of visibility, but is bullish on Robinhood's long-term potential and opportunity.

HOOD Price Action: Robinhood shares were sliding 7.5% to $14.72 Wednesday afternoon, according to Benzinga Pro

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