Citi believes Robinhood (NASDAQ:) Markets’ inventory isn’t set for large wins this 12 months till the zero-fee app begins displaying extra regular development and consistency.
The financial institution is shifting to a extra cautious stance on Robinhood inventory whereas indicating a desire for LPL Monetary (NASDAQ:) and Interactive Brokers (NASDAQ:).
Citi Analysis at this time launched its first-quarter preview for North American brokers and asset managers. The evaluation comes amid a backdrop of sturdy market ranges and sturdy buying and selling exercise benefiting the sector, with explicit deal with natural development momentum as a key issue for score.
Robinhood inventory has jumped by greater than 44% year-to-date, a surge attributed largely to the rising costs of . The analyst notes that the favored buying and selling app is displaying a 92% correlation with authentic cryptocurrency for the reason that starting of 2024.
Nevertheless, with crypto accounting for 13% of Robinhood’s first-quarter income, Citi believes the inventory’s valuation has grow to be disconnected from its fundamentals. The report highlights considerations over a possible pullback in Bitcoin costs or a market downturn affecting Robinhood’s inventory, particularly given its present valuation premium in comparison with Interactive Brokers.
Citi additionally means that the no-fee app faces headwinds resulting from a gradual lower in retail traders’ engagement with the inventory market. This diminishing curiosity is turning into evident because the inventory market experiences a chronic interval of losses and the influence of stimulus checks begins to wane.
In the meantime, LPLA and IBKR are highlighted for his or her sturdy natural development momentum and potential shifting ahead. LPLA’s alternatives within the enterprise channel and its momentum in recruiting wirehouse monetary advisors are notably famous.
IBKR’s standout options embrace its account development price, which accelerated to 29% annualized development within the first quarter of 2024, and its sturdy buying and selling exercise and margin lending.
Whereas the report is bullish on the expansion momentum of LPLA and IBKR, it adopts a extra cautious stance on Stifel Monetary (NYSE:) and Raymond James Monetary (NYSE:). Citi evaluation cites a wait-and-see strategy resulting from latest inventory efficiency and a desire for higher entry factors. Charles Schwab (NYSE:) is seen as having a balanced threat/reward profile resulting from a blended outlook regardless of clearing the decks with its Q1 pre-announcement.
