Shares of Robinhood Markets (NASDAQ:) are down almost 3% in pre-open Friday after Goldman Sachs analyst Will Nance downgraded to Sell from Neutral.

The analyst sees the current Street estimates as too high, including a high bar for HOOD to reach profitability in 2023 (requires 10+% organic revenue growth + macro tailwinds) as the company has noted.

Another key factor behind a downgrade call is the fading retail engagement, especially among the broker’s lower end customers. Additionally, the continued weakness in account growth is also listed as a headwind.

We believe this lack of clarity around the path to profitability will prevent the stock from re-rating higher, Nance said in a client note.

For Nance to become more constructive on Robinhood, he lists three things he is looking for:

1) An inflection in user growth, which we view as necessary for the company to continue to scale its platform;

2) A clearer path to near-term profitability, and

3) A more conservative Street outlook for revenue growth.

Nance is 10%/18% below 2022/2023 consensus on revenue.

The new price target on HOOD shares is $13.00, down from $15.00.

The analyst also downgraded AvidXchange (NASDAQ:) to Neutral from Buy.

By Senad Karaahmetovic