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Robinhood is a ‘flawed business model’: Jeff Kilburg

on Aug 15, 2022
  • Kilburg says Robinhood up 70% from its YTD low is a strong "sell".
  • He does not like the payment for order flow business model.
  • Robinhood lost 1.9 million MAUs in its recent financial quarter.

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Robinhood Markets Inc (NASDAQ: HOOD) has bounced about 70% off its low in mid-June, which, as per Jeff Kilburg (Chief Investment Officer at Sanctuary Wealth) is an opportunity to pull out of the stock.

Robinhood is unlikely to be profitable anytime soon

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Kilburg wants Robinhood to be profitable before he changes his stance on the “fintech”. According to the Bank of America Corp, though, “that” is unlikely to happen before 2025.

He’s been vocal against the California-based company ever since it went public last year. Explaining why on CNBC’s “The Exchange”, he said:

It’s a flawed business model. 80% of their revenue is predicated on them selling their order flow. That goes away; the SEC is trying to crack down that to a certain extent. It doesn’t work, it doesn’t add up to me.

Despite the recent rally, Robinhood is still down massively from its IPO price of $38 a share.

Robinhood Markets lost 1.9 million MAUs in Q2

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Earlier this month, Robinhood reported weaker-than-expected quarterly sales as assets under custody and, more importantly, monthly active users plummeted in Q2.

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Consequently, the Nasdaq-listed firm revealed plans of lowering its headcount by 23% to cut costs. Kilburg added:

I don’t like the longevity and efficacy of that business model. They’re not diversified. If they got more diversified, I could change my mind. But right now, I’m surprised it’s in double digits. I want to stay away from Robinhood. Sell, sell, sell!

Wall Street currently has a consensus “hold” rating on the Robinhood stock with downside to $5.0 a share in the worst-case scenario.


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