Goldman Sachs upgrades Robinhood stock to Neutral, says there's a more risk risk risk profile

The retail brokerage received an upgrade from analysts at Goldman Sachs, who believe there is a more balanced risk reward profile for the shares.

Analyst Will Nance raised his rating on the Robinhood ticker HOOD to Neutral from Sell on Monday, saying that the company was approaching its cash value at its current valuation.

The analyst said that Robinhood will benefit from a faster than expected increase in interest rates. He estimates that a 3.5% move in rates could add an incremental $549 million to adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization. HOOD's net interest revenues derived from balance sheet cash, margin loans, bank sweeps and client payables will benefit from incremental rate hikes, he wrote in a research note. Nance said engagement levels, measured by total trading volumes, have stabilized in the wake of the meme stock trading craze in early 2021. He said that the company is implementing cost-reduction efforts that could help boost margins. Nance believes that Robinhood's fundamentals are still very weak, as declines in retail trading have pressured margins and active users. The analyst lowered his price target to $9.50 from $11.50 to reflect the environment. Analysts are divided on how to rate Robinhood, with 33% rating the stock a Buy, 47% rating it a Hold and 20% rating a Sell. In mid-June, Atlantic Equities downgraded the stock to Underweight from Neutral, citing weak market conditions and plummeting cryptocurrencies valuations. Robinhood's stock was up 2.5% to $8.20 in premarket trading on Monday. The shares have lost 55% this year.