Robinhood Markets Inc. (HOOD) stock plummeted 5.02% on Tuesday morning following a downgrade from Wolfe Research.
Wolfe Research analyst Steven Chubak cut his rating on HOOD shares to "Peer Perform" from "Outperform", citing concerns over the online brokerage's payment for order flow (PFOF) revenue model amid increased regulatory scrutiny.
While citing Robinhood's strong growth and increased user engagement, Chubak warned that potential PFOF bans or restrictions "would severely undermine HOOD's profitability." The downgrade comes ahead of the SEC's anticipated proposal on reforming stock trading practices including PFOF.
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