Goldman Sachs on Friday downgraded shares of online brokerage Robinhood , citing bleak user engagement and growth. The firm lowered its rating on Robinhood to sell from neutral and has 12-month price target of $13 on the stock. The projection implies 7.7% upside from Robinhood's closing price Thursday. "We believe softening retail engagement levels (particularly among the low-end consumer), continued weakness in account growth, and a limited path to near term profitability are likely to limit outperformance over the next twelve months," Goldman's Will Nance said in a note Friday. "Intra-quarter app download data suggests user growth has remained depressed, and we see an acceleration in user growth as a key requirement for shares to re-rate higher," Nance said. Robinhood's fourth-quarter report showed the company lost active users . For the first and second quarter of 2022, the company faces tough comparisons from the year prior, when retail investor phenomena like the GameStop short squeeze drove significant user activity and growth. Plus, Goldman says Robinhood is overvalued by Wall Street. The consensus price target among analysts is $16.57 per share, according to FactSet, which implies 37.3% upside. "We believe Street estimates are still too high and see a high bar for HOOD to reach profitability in 2023," Nance said. Robinhood shares are down 32% in 2022, versus the S & P 500's 5.6% decline this year. —CNBC's Michael Bloom contributed reporting.
Vlad Tenev, co-founder and CEO of Robinhood rings the opening bell at the Nasdaq on July 29th, 2021.
Source: The Nasdaq
Goldman Sachs on Friday downgraded shares of online brokerage Robinhood, citing bleak user engagement and growth.