In one sense, stock-trading app Robinhood Markets (NASDAQ:HOOD) could hardly have timed its initial public offering better. HOOD stock went public on July 29 at $38 a share. Less than a week later, it hit an intraday high of $85 for a 124% gain.

Remember that this was a time of meme stock mania, retail trading frenzy and growth stock rapture. And HOOD stock combined all three.

Investors’ initial euphoria did not last long, though. Since topping out in early August, it’s been mostly downhill for HOOD stock. Shares sit 84% below their all-time high and are down 60% in just the past three months.

Given rising interest rates, the growth stock exodus and Robinhood’s weak quarterly results, investors should not expect a return to the glory days of late summer.

HOOD Stock Hit By the Decline in Retail Trading

Robinhood reported fourth-quarter results on Jan. 28, prompting HOOD stock to fall to an all-time low under $10 per share.

Quarterly revenue rose 14% year over year to $363 million, coming in slightly above analysts’ estimates. Here’s a look at the revenue breakdown:

• Transaction-based revenue up 12% YOY to $264 million
• Options revenue up 14% YOY to $163 million
• Cryptocurrencies revenue up 304% YOY to $48 million
• Equities revenue down 35% to $52 million

Despite seeing growth in most of its segments, Robinhood reported a bigger-than-expected net loss of $423 million, or 49 cents per diluted share. This compared to net income of $13 million a year ago.

For the full year, revenue increased 89% to $1.82 billion but the company still posted a net loss of $3.69 billion. This was due in part to a share-based compensation expense of $1.57 billion for the year.

More worrisome, though, is Robinhood’s average revenue per user. In Q4, ARPU fell by 39% to $64 on an annualized basis. This is not all that surprising given the slowdown in retail trading over the past few months. Monthly active users fell 8.5% from the third quarter to 17.3 million.

Even the surge in cryptocurrency trading volume did not make up for the falloff in equities trading. And the company also said the decline in market rates earned on loaned securities resulted in lower interest earnings per user.

Robinhood Offers a Bleak Outlook

In addition to current headwinds, the company is facing tough comparables with the first two quarters of 2021, when Robinhood reaped the benefits of the meme trading frenzy.

Investors were less than thrilled with the outlook that accompanied Robinhood’s latest earnings report. Management forecasted revenue of less than $340 million for the first quarter. That would represent a 35% decline compared with Q1 2021 and was below the $448.2 million in revenue Wall Street was expecting.

It’s quite possible that the slowdown in retail trading will persist throughout 2022. As life creeps back toward normal, it’s likely people will spend less time on their brokerage apps. Furthermore, the sell-off in stocks and elevated market volatility have hurt investor confidence. Any further dropoff in trading activity is going to be felt by Robinhood and HOOD stock investors.

Finally, the company also faces regulatory scrutiny surrounding its payment for order flow revenue model. Given that PFOF accounted for nearly three-quarters of Robinhood’s Q4 revenue, the company could find itself in a tough spot if regulators decide to crack down on the practice this year.

Opportunities, Risks in the Crypto Market

Robinhood has what it calls “ambitious” plans for 2022, which include expanding its cryptocurrency platform to international customers. This would undoubtedly increase its customer base, but Robinhood will need to act fast.

Competition in the United States is already stiff, with Coinbase (NASDAQ:COIN) adding new coins to its platform and offering a library of video tutorials to help attract more users. Coming late to the game will require increased marketing spending for Robinhood to capture customers, resulting in higher capital expenditures.

Robinhood ended 2021 with $6.3 billion in cash and cash equivalents. But with high stock-based compensation and the need to hold cash to meet clearing broker obligations, it’s possible the company with continue to run at a loss for a few years.

This means less money to invest in the expansion of its crypto platform, which may just wind up distracting from the core business of stock and options trading anyway.

Furthermore, cryptocurrencies are facing increased regulatory scrutiny, and Robinhood will need to be careful to remain in compliance with any new regulations. This may prompt the need for the company to hire more lawyers and specialists in the cryptocurrency field, potentially adding to the company’s costs.

The Bottom Line on HOOD Stock

Wall Street has a mixed view on HOOD stock. According to TipRanks, the average target price for shares is $20.17, which is more than 50% above the current price. However, of the 13 analysts following HOOD stock, six rate it a “hold” and two rate it a “sell.” This lack of conviction from Wall Street is not encouraging.

Contrarian investors might be tempted to buy shares for a rebound, but the fundamentals aren’t in their favor. A slowdown in retail trading and revenue, rising costs and an unfavorable macro environment do not bode well for Robinhood. Therefore, investors should avoid or sell HOOD stock.

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.