Kenneth Worthington, J.P. Morgan Analyst reiterated his Underweight rating for Robinhood (NASDAQ) and set a $11.00 target share price.

“The data is not pretty,” says Worthington as woeful market conditions have weighed in heavily on Robinhood’s business. It’s worse looking than Q1. Q2 data looks even worse.

“In both rising and falling markets over the last three quarters and so far in 2Q22, Robinhood investors have both generated negative returns and have meaningfully underperformed the returns of the and . We think that the easy money made by leveraged-long trades in the meme-stock era is over,” the analyst said in a client note.

Worthington anticipates slower volumes as well as lower margins, which will hurt already low profitability over the short term.

“Should it persist, account opening with further slow as well the current healthy level of net new accounts. Interestingly, the tepid trading activity could persist even when market conditions recover,” Worthington added.

Additionally, the analyst believes that there is a possibility for continued tepid trading, much like the Ameritrade situation in late 1990s or early 2000s.

“Ameritrade trading volumes and margin balances fell by ~75% from peak levels in C1Q00 (F2Q00). Interestingly, account balances continued to grow for Ameritrade although the frenzied pace of account openings slowed within 12-24 months.”

By Senad Karaahmetovic