By Senad Karaahmetovic

Atlantic Equities Analyst John Heagerty has been downgraded Robinhood Markets (NASDAQ:) to Underweight from Neutral as he is “increasingly concerned about the deteriorating revenue trends” facing the company.

Heagerty’s move comes as Robinhood faces a rapid decline in monthly active users (MAUs), as well as falling average revenue per user (ARPU).

“With customers returning to pre-pandemic behavioural trends and a potential recession ahead, user engagement seems likely to decline further. The decline in equity markets usually precedes lower retail trading volumes, and there is a significant regulatory threat to PFOF revenue. Lastly, plummeting crypto valuations will have a direct impact on both volumes and order value,” Heagerty told clients in a note.

This has led to the analyst cutting revenues by 10% for 2022 and 25% for 2023, as the company is unlikely to be profitable before 2025.

“The extended duration to achieving EBITDA profitability substantially lowers our DCF-based valuation. In addition, our revenue-based and NTA-based valuations are considerably lower than previously with downside risk to our revenue forecasts,” he added.

The price target for $5.00 is indicative of around 30% decline in current market levels.

Robinhood shares fell nearly 3% Wednesday morning, pre-market.