Citi Downgrades Robinhood, Says FTX Fallout Will Weigh on Crypto Trading Revenue

Robinhood Markets (HOOD) faces potential headline risk from imminent Securities and Exchange Commission market structure proposals, a cautious stock market outlook and potential fallout from the FTX collapse hitting crypto trading revenue, Citi (C) said in a research report Tuesday.

The bank downgraded its rating on the stock to neutral from buy and cut its price target to $10 from $11. Robinhood shares rose 0.2% to $9.58 in premarket trading. The stock has fallen around 40% this year.

The collapse of FTX and the resulting fallout has a number of potential implications for Robinhood, the report said. These include the potential liquidation of 56.3 million shares owned by FTX founder Sam Bankman-Fried, the removal of FTX as a potential acquirer, and lower crypto trading revenue due to the “substantial price declines and material deterioration in investor confidence.

Citi expects Robinhood’s trading revenue to drop over 50% next year after a more than 50% decline in 2022.

The bank notes that Robinhood has $7 in net cash per share, which should support the stock.

Read more: Bankrupt Crypto Lender BlockFi Sues Bankman-Fried for Robinhood Shares, FT Reports

CORRECTION (Dec. 13, 12:37 UTC): Corrects company name to Robinhood throughout from Robin Hood; updates share price.