- Robinhood share price crashed by 55% in 2022.
- The company faces significant risks in 2023.
Robinhood stock price plunged by more than 55% in 2022 as the company faced significant risks. The shares plunged to a low of $7.60, which was the lowest level since June 23rd. It has dropped by more than 90% from its all-time high, bringing its total market cap to about $7.22 billion.
Robinhood risk/reward analysis
Robinhood share price nosedived because of several factors. First, the collapse of the stock market drove traders out of the market. After being extremely active in 2021, most traders decided to keep away from the market in 2022. This happened as popular stocks like Carvana, Tesla, AMC, and Bed Bath and Beyond plunged. Tesla shed over $700 billion of its value in 2022.
Second, HOOD stock price tumbled after the collapse of cryptocurrencies. In total, cryptocurrencies shed over $2 trillion worth of value in 2022. Bitcoin, the biggest crypto in the world shed 65% while Ethereum dropped by over 70% despite the successful merge event.
Third, the biggest risk that Robinhood faces is the Securities and Exchange Commission (SEC), which wants to change the company’s business model. Robinhood pioneered the concept of commission-free investing. Instead of commissions, the company makes money by charging market-makers like Citadel and Virtu Finance.
The SEC has proposed an auction model that will do away with market-makers. If this happens, Robinhood will be forced to change its business model to accommodate the SEC. Instead, it will likely introduce commissions. The impact of such a move is not yet well-known.
Robinhood has several opportunities in 2023. First, as I wrote in this article, a bull case for Bitcoin and cryptocurrencies can be made. A recovery of crypto and growth stocks could be bullish for HOOD stock. Further, it is unclear whether the SEC overhaul will be done any time soon. Finally, a Fed pivot will also be a bullish catalyst for BTC prices.
In my view, I believe that the risks of investing in Robinhood outweigh the opportunity at this stage. Besides, I suspect that the company’s results for the fourth quarter will disappoint.
Robinhood stock price forecast
The daily chart shows that the HOOD stock price has been in a strong sell-off in the past few weeks. It has managed to move below the lower side of the ascending channel shown in black. The shares have moved below all moving averages. It has also formed a break and retest pattern.
Therefore, the stock will likely continue falling in 2023 as sellers target the next key support level at $6.85. A move above the resistance point at $8.75 will invalidate the bearish view.
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