Breaking News
Black Friday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Robinhood Stock Faces Headwinds as SEC Weighs in

Stock MarketsOct 11, 2021 04:31PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. Robinhood Stock Faces Headwinds as SEC Weighs in

Stock trading platform Robinhood (NASDAQ:HOOD) has been making headlines.

The company took a hit with some reports out from the SEC (Securities and Exchange Commission) about some of its operating practices.

When the SEC starts taking notice, it's seldom a good sign, and that's why I'm moderately bearish on Robinhood. (See Analysts’ Top Stocks on TipRanks)

Looking at Robinhood stock since it went public in late July is like looking at the blueprint of a marginally thrilling roller-coaster.

There's one big climb as the company better than doubles its value in the space of late July to early August. Then, much like that roller-coaster, there's a plunge, a slight climb, another plunge, and a series of dips and hills.

That's when the SEC took a hand in the game. Late last week, Robinhood filed an amendment to an already-amended statement with the SEC. This amendment basically called for the SEC to hurry things along and allow sales to take place according to the earlier statement, which has been titled “Resale S-1.”

It's a lot of bureaucratic language to wade through. The gist of it is that the SEC is taking increased notice of Robinhood. That may hurt the platform's ability to let users actually use it.

Wall Street's Take

Wall Street consensus analysis calls Robinhood a Moderate Buy. Based on the projections of 13 analysts that have 12-month price targets on the company issued in the last three months, seven consider it a Buy. Five call it a Hold, and one analyst has it classified as a Sell.

The average Robinhood price target occupies a fairly broad range. The current average target is $53, with a high target of $68, and a low target of $35.

Strong Competitor with Serious Problems

Give Robinhood some credit for improvement in the last couple of months.

Its move to bring 24/7 phone support to its operation means high marks from users. It also helps that the company offers IPO Access. IPO Access allows people an opportunity to buy the companies of tomorrow at comparatively lower prices. Its fractional share purchases, and access to cryptocurrency trading also give it an edge in the market.

However, Robinhood seems to be the SEC's whipping boy of choice lately. One of Robinhood's key revenue streams, known as “payment for order flow,” is in jeopardy. Payment for order flow, or PFOF, allows brokerage firms like Robinhood to be paid if they route orders to different places. If the SEC puts its foot down on such practices, that's a blow to Robinhood's cash flow.

What's more, that cryptocurrency trading that Robinhood is engaging in is also coming under SEC scrutiny. If those markets become increasingly regulated, a big slug of Robinhood's revenue — about 41% in the second quarter alone — could be at risk.

That's an awful lot of worries in one place. That makes Robinhood an even bigger risk than its fundamentals should suggest. Throw in the fact that it's a very recent competitor to a very crowded market, and that puts Robinhood even farther on the back foot.

Concluding Views

Robinhood is, objectively, a solid operation. It has plenty of worthwhile features. Robinhood smoothly combines stock and crypto trading under one roof, which is handy.

Robinhood has a lot of room to improve, and a lot going for it. However, until the SEC pulls the spotlight it's placed on Robinhood somewhere else, it's hard to be very bullish on Robinhood at all.

Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

Robinhood Stock Faces Headwinds as SEC Weighs in

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email