Citi analysts opened a 90-day negative catalyst watch on Robinhood (NASDAQ:HOOD) in a note Wednesday ahead of the formal release of the SEC market structure rules in early 2024.
Analysts told investors that although cash equities only account for 6% of HOOD's revenues, they see the SEC market structure rules as a potential headline risk for the brokerage given its PFOF-focused model in securities.
"While we do not believe some of the more impactful rules (ie. auctions) will ultimately go through in the original form, we view these proposals as a near-term risk to the stock," analysts wrote.
"Also, the stock has been rallying on better crypto activity, but the revenue contribution (5% of revs) is not material enough to warrant such a response in our view, particularly as HOOD is among the most asset-sensitive names in the space given its over $5B of corp cash," analysts added.
HOOD shares are down around 1% premarket following the note. However, the stock has gained over 21% in the last three months.