Robinhood’s launch of 24-hour trading has attracted a lot of attention, but likely won’t improve the company’s financial performance, Morgan Stanley said. The popular millennial trading app announced on Wednesday that it will offer 24/7 trading in select stocks and exchange-traded funds, five days a week. Morgan Stanley thinks it’s too early to tell if this will be a hit with its customers or if it’s just marketing pomposity. “While we don’t think 24/5 trading alone will be a significant boost to HOOD in the short term – earnings have not met material requirements since the company introduced over-hours and lack of liquidity could be a problem – launch and related marketing and press coverage can drive new customer growth and increase platform engagement,” the Wall Street company said in a Friday note. The company retained an equal share rating. Its 12-month price target of $12 is about $2 higher than it is now. HOOD YTD Mountain Robinhood Morgan Stanley said the commission-free, 24/7 in-app trading offer could also raise questions about liquidity and how a broker can provide the best trade execution. Trading volumes tend to be low after business hours and activity can more easily cause price fluctuations. “This is likely to raise questions about how they demonstrate and meet client best execution requirements in tight pre-market liquidity conditions and/or in situations where trades are executed with a significant variance from the previous close and the next open,” Morgan Stanley said. . . Robinhood has lost some of its luster as the pandemic-fueled retail investor trading boom faded. The stock lost 54% last year and has rebounded about 15% since the beginning of the year. Earlier this week, the retail brokerage reported an overshoot in earnings while posting an increase in monthly users to 11.8 million. “At the moment, 24/7 trading is more strategically important to HOOD than financially, but this may change over time as liquidity builds up after business hours, which will take time and client trading patterns will evolve until late into the evening.” – Morgan. Stanley said.
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