10/15/23, 1:53 PM MoneyWeek - 2023-10-13

32 Trading
Robinhood misses target
The online trading platform is heading for trouble and looks far too pricey
How my tips
have fared
It has been a poor mont
for my long tips: seven o
the eight fell. Builder DR
Matthew Partridge Horton slipped from
Shares editor $118 to $104, triggering
the stop- loss at $105.

I wrote a review of the film Dumb Money last

week. It tells the story of the GameStop short
squeeze of early 2021. While the short-sellers
Ship broker Clarkson
declined from 2,745p to
2,635p, while discount
retailer B&M tumbled
are portrayed as the big villains, the film isn’t from 578p to 565p.
particularly complimentary about the founders Kitchen supplier
of the online trading platform Robinhood Howden Joinery went
(Nasdaq: HOOD) either, thanks to its decision down from 735p to 695p
to stop users trading GameStop shares near the Luxury brand Watches
height of the bubble. of Switzerland dropped
from 617p to 500p;
As the film pointed out, the negative publicity recruitment agency
generated by the episode had a damaging impact SThree dipped from
on Robinhood. The group’s stock has fallen by

segamI ytteG©
355p to 348p and
more than 75% since its initial public offering The shares have fallen by 75% since the IPO in 2021 outsourcer Mitie fell
(IPO) in late July 2021. from 103p to 97p. Only
However, worse may be yet to come. When it other markets – it has announced it will launch in IT-services group
launched, Robinhood’s unique selling point was the UK by the end of the year. Computacenter bucked
that it didn’t charge users a commission for buying The problem is this is going to be harder than it the trend. It advanced
and selling shares. This made it extremely popular looks. This is because the UK has already from 2,052p to 2,472p.
Counting DR Horton, my
with ordinary traders, especially those with banned payment for order flow (market long tips are making a
relatively small amounts of capital. makers giving a rebate to direct orders net profit of £197.
Moreover, during the pandemic many people through them), one of the key ways in which The good news is tha
had a great deal of time on their hands (which Robinhood is able to make money without all of my five short tips
is why it found itself at the centre of the “meme charging a commission. The EU is in the moved in my favour.
stock” craze). The problem is that many of those process of following suit. While this won’t Space-based broadban
traders lost interest in the market once lockdowns completely destroy its business model, the group network-builder AST
and other Covid restrictions ended and other will also have to compete with established SpaceMobile dipped
leisure activities reopened. from $3.89 to $3.72, and
“The group is now facing companies, such
as Freetrade. video game retailer
GameStop went down
Sales growth will slow competition from big names All these problems from $17.39 to $14.92.
Robinhood is now also make the fact that
facing competition from a such as Fidelity” Robinhood trades at
Electric-car charging-
station company EVgo
host of US platforms that offer a similar nearly 90 times 2024 earnings and 5.3 times decreased from $3.75 to
set-up. These range from established providers, sales hard to justify. By comparison, Hargreaves $3.13. What’s more,
such as JP Morgan, Fidelity and Charles Schwab, Lansdown, a fast-growing profitable company payroll firm Paycom
to other apps, such as Webull. When combined with a much more established track record, declined from $287 to
with the negative publicity from GameStop, this trades at just 12 times 2024 earnings and $271 and solar panel
maker Sunrun fell from
led to a fall in revenue of nearly a quarter between 4.9 times revenue. $13.87 to $10.27. My
2021 and 2022. With Robinhood facing ongoing legal woes, short tips are now
While growth is expected to bounce back to just and trading below its 50-day and 200-day moving making a profit of £3,132
above 2021 levels this year, it is then set to slow to averages, it is time to short the company at the The short and long
10% a year, and there are already signs that the current price of $9.76, at £175 per $1. I’d put the tips are making joint
platform’s number of active users is shrinking. As stop-loss at $15, which would give you a total profits of £3,229. I now
a result, Robinhood is considering expanding into downside of £917. have seven long tips
(B&M, Computacenter,

Trading techniques... profit warnings

 of Switzerland, Howden
Companies may be eager to
issue press releases, but they
do not like to put out profit
warnings. These are statements
that earnings will fall short of
expectations. Technically the
rules don’t require such alerts.
However, not issuing them and
leaving the bad news until the
formal earnings announcement
can leave firms open to charges
of market manipulation and risk
anger from shareholders.
So many companies decide
that it is better to be cautious by
lowering expectations in
advance. According to
accounting firm Ernst and
Young, which has been tracking
13 October 2023
warnings of UK registered
companies since 1999, a total of
305 warnings were issued in
2022 alone.
As you might expect, profit
warnings frequently trigger an
immediate fall in a firm’s stock
price. However, there is
evidence that the shares of firms
that issue profit warnings do
worse in the medium term, too.
For example, a 2002 study from
the University of Exeter looked
at the performance of 455 UK
companies that issued profit
warnings between August 1997
and the end of 1999.
They found that not only did
the share price immediately
Clarkson, Mitie, Watche
Joinery and SThree) and
fall by an average of 16.7%, seven short ones (EVgo
but it also lagged the market AST SpaceMobile,
by a further 3.9% over the next Paycom, GameStop,
six months. Sunrun and Robinhood)
A similar story emerges I suggest you cut
from a study released this the price at which you
year by investment service cover EvGo to $6 (from
Stockopedia. Looking at 245 $8) and Paycom to $350
profit warnings for FTSE ($410). I would also raise
companies between January the stop-losses on B&M
2013 and early August 2016, to 400p (from 350p);
they found that the share price Computacenter to
of the company affected fell by 2,100p (2,000p); Clarkso
an average of 19.2% on the first to 2,300p (2,250p),
day. However, by 80 days after Mitie to 80p (75p),
the announcement this had Watches of Switzerland
increased to roughly 25%; even to 410p (from 400p),
a full year later the company Howden Joinery to 420p
was down by about 30%. (418p) and SThree to
210p (205p).
moneyweek.c

https://www.yumpu.com/news/en/issue/166066-moneyweek-2023-10-13/read?page=33 1/2
10/15/23, 1:53 PM MoneyWeek - 2023-10-13

32 Trading
Robinhood misses target
The online trading platform is heading for trouble and looks far too pricey
How my tips
have fared
It has been a poor mont
for my long tips: seven o
the eight fell. Builder DR
Matthew Partridge Horton slipped from
Shares editor $118 to $104, triggering
the stop- loss at $105.

I wrote a review of the film Dumb Money last

week. It tells the story of the GameStop short
squeeze of early 2021. While the short-sellers
Ship broker Clarkson
declined from 2,745p to
2,635p, while discount
retailer B&M tumbled
are portrayed as the big villains, the film isn’t from 578p to 565p.
particularly complimentary about the founders Kitchen supplier
of the online trading platform Robinhood Howden Joinery went
(Nasdaq: HOOD) either, thanks to its decision down from 735p to 695p
to stop users trading GameStop shares near the Luxury brand Watches
height of the bubble. of Switzerland dropped
from 617p to 500p;
As the film pointed out, the negative publicity recruitment agency
generated by the episode had a damaging impact SThree dipped from
on Robinhood. The group’s stock has fallen by

segamI ytteG©
355p to 348p and
more than 75% since its initial public offering The shares have fallen by 75% since the IPO in 2021 outsourcer Mitie fell
(IPO) in late July 2021. from 103p to 97p. Only
However, worse may be yet to come. When it other markets – it has announced it will launch in IT-services group
launched, Robinhood’s unique selling point was the UK by the end of the year. Computacenter bucked
that it didn’t charge users a commission for buying The problem is this is going to be harder than it the trend. It advanced
and selling shares. This made it extremely popular looks. This is because the UK has already from 2,052p to 2,472p.
Counting DR Horton, my
with ordinary traders, especially those with banned payment for order flow (market long tips are making a
relatively small amounts of capital. makers giving a rebate to direct orders net profit of £197.
Moreover, during the pandemic many people through them), one of the key ways in which The good news is tha
had a great deal of time on their hands (which Robinhood is able to make money without all of my five short tips
is why it found itself at the centre of the “meme charging a commission. The EU is in the moved in my favour.
stock” craze). The problem is that many of those process of following suit. While this won’t Space-based broadban
traders lost interest in the market once lockdowns completely destroy its business model, the group network-builder AST
and other Covid restrictions ended and other will also have to compete with established SpaceMobile dipped
leisure activities reopened. from $3.89 to $3.72, and
“The group is now facing companies, such
as Freetrade. video game retailer
GameStop went down
Sales growth will slow competition from big names All these problems from $17.39 to $14.92.
Robinhood is now also make the fact that
facing competition from a such as Fidelity” Robinhood trades at
Electric-car charging-
station company EVgo
host of US platforms that offer a similar nearly 90 times 2024 earnings and 5.3 times decreased from $3.75 to
set-up. These range from established providers, sales hard to justify. By comparison, Hargreaves $3.13. What’s more,
such as JP Morgan, Fidelity and Charles Schwab, Lansdown, a fast-growing profitable company payroll firm Paycom
to other apps, such as Webull. When combined with a much more established track record, declined from $287 to
with the negative publicity from GameStop, this trades at just 12 times 2024 earnings and $271 and solar panel
maker Sunrun fell from
led to a fall in revenue of nearly a quarter between 4.9 times revenue. $13.87 to $10.27. My
2021 and 2022. With Robinhood facing ongoing legal woes, short tips are now
While growth is expected to bounce back to just and trading below its 50-day and 200-day moving making a profit of £3,132
above 2021 levels this year, it is then set to slow to averages, it is time to short the company at the The short and long
10% a year, and there are already signs that the current price of $9.76, at £175 per $1. I’d put the tips are making joint
platform’s number of active users is shrinking. As stop-loss at $15, which would give you a total profits of £3,229. I now
a result, Robinhood is considering expanding into downside of £917. have seven long tips
(B&M, Computacenter,

Trading techniques... profit warnings

 of Switzerland, Howden
Companies may be eager to
issue press releases, but they
do not like to put out profit
warnings. These are statements
that earnings will fall short of
expectations. Technically the
rules don’t require such alerts.
However, not issuing them and
leaving the bad news until the
formal earnings announcement
can leave firms open to charges
of market manipulation and risk
anger from shareholders.
So many companies decide
that it is better to be cautious by
lowering expectations in
advance. According to
accounting firm Ernst and
Young, which has been tracking
13 October 2023
warnings of UK registered
companies since 1999, a total of
305 warnings were issued in
2022 alone.
As you might expect, profit
warnings frequently trigger an
immediate fall in a firm’s stock
price. However, there is
evidence that the shares of firms
that issue profit warnings do
worse in the medium term, too.
For example, a 2002 study from
the University of Exeter looked
at the performance of 455 UK
companies that issued profit
warnings between August 1997
and the end of 1999.
They found that not only did
the share price immediately
Clarkson, Mitie, Watche
Joinery and SThree) and
fall by an average of 16.7%, seven short ones (EVgo
but it also lagged the market AST SpaceMobile,
by a further 3.9% over the next Paycom, GameStop,
six months. Sunrun and Robinhood)
A similar story emerges I suggest you cut
from a study released this the price at which you
year by investment service cover EvGo to $6 (from
Stockopedia. Looking at 245 $8) and Paycom to $350
profit warnings for FTSE ($410). I would also raise
companies between January the stop-losses on B&M
2013 and early August 2016, to 400p (from 350p);
they found that the share price Computacenter to
of the company affected fell by 2,100p (2,000p); Clarkso
an average of 19.2% on the first to 2,300p (2,250p),
day. However, by 80 days after Mitie to 80p (75p),
the announcement this had Watches of Switzerland
increased to roughly 25%; even to 410p (from 400p),
a full year later the company Howden Joinery to 420p
was down by about 30%. (418p) and SThree to
210p (205p).
moneyweek.c

https://www.yumpu.com/news/en/issue/166066-moneyweek-2023-10-13/read?page=33 2/2