Bernstein: Robinhood Prediction Market Revenue Can Reach $1.7B in 2028

Shares of Robinhood (NASDAQ: HOOD) ticked higher Monday after Bernstein analyst Gautam Chhugani boosted his price target on the financial services stock due in part to the company’s burgeoning prediction market footprint.

In a new report to clients, Chhugani reiterated an “outperform” rating on Robinhood while boosting his price forecast on the stock to $160 from $130, implying potential upside of approximately 60% from the July 17 close.

California-based Robinhood has consistently said event contracts represent one of its fastest-growing segments, but Chhugani says it’s possible that business will eventually become the fastest grower in the Robinhood suite. The analyst forecast 64% annual growth for Robinhood’s prediction market business through 2028 on the way to revenue of $1.7 billion.

Noting that Robinhood is among the brokerage firms best-positioned to benefit from the expansion of prediction markets, perpetual futures, tokenized equities and other next-generation markets, the Bernstein analyst adds that the second quarter could be the first in which Robinhood reports prediction market revenue in excess of its cryptocurrency business. Clarity on the matter will arrive when the company reports quarterly results on July 29.

Robinhood World Cup Wins

As is the case with some rival yes/no exchanges, Robinhood benefited from the World Cup – an event that commanded 27% of regulated U.S. sports betting since kicking off last month.

Prior to the start of the tournament, Robinhood announced it would route World Cup trades through Rothera (and some Major League Baseball contracts). Rothera is a separate entity from the financial technology (fintech) firm in which it and market making giant Susquehanna International Group are investors.

As of July 10, Rothera processed $3 billion in World Cup event contracts with data confirming volume spikes around tentpole matchups, indicating it’s likely that the semifinal and 3^rd-place matches as well as Sunday’s title game likely brought similar upticks in turnover. Rothera commanding a significant slice of the World Cup volume pie is impressive when considering the exchange began accepting trades in May.

Some analysts believe the Robinhood/Susquehanna relationship is paying dividends for Rothera because the market maker is leveraging its expertise to add liquidity and keeping spreads tight while allowing Rothera to, in some cases, undercut rivals on fees. Bernstein’s Chhugani estimates that since Rothera went live, it’s handled more than 3.5 billion event contracts with the World Cup accounting for 93% of that tally.

Room for Rothera Growth

Robinhood has a couple of other arrows in its quiver when it comes to exciting investors vis a vis prediction markets. First, as Chhugani points out, Rothera currently accounts for just 16% of Robinhood’s overall prediction market volume. Over time, that percentage could increase, potentially stoking bottom and top line upside.

Second, investors, including those of the retail persuasion, are enthusiastic about prediction markets, but there aren’t many public companies to express views on the rapidly growing space. Robinhood, a name familiar to millions of retail investors, is one.