Compass Point Still Bullish on Robinhood, Citing Prediction Market Growth

Analysts at investment bank Compass Point believe that Robinhood’s stock will continue to climb, pointing to prediction market growth and revenue from crypto trading fees and staking rewards.

Professional sports are emerging as a notable tailwind for Robinhood. When the retail brokerage reports third-quarter earnings next month, Robinhood will likely say that revenue generated from prediction markets grew at a faster rate than revenue derived from processing customers’ transactions, the analysts wrote in a Monday note.

In the three months ended Sept. 30, prediction market revenue likely increased 100% quarter-over-quarter to around $20 million, Compass analysts wrote. Meanwhile, Compass analysts expect transaction revenue to increase 35% over the same period.

In the U.S., people typically spend more time gambling in autumn as professional sports seasons for basketball and football begin. However, bettors are navigating a plethora of options as prediction markets parallel the functionality of some sportsbooks.

Robinhood will likely generate $50 million in fourth-quarter revenue “alongside a full quarter of NFL season,” the analysts wrote, while referring to America’s most popular pastime.

Robinhood began letting customers wager on NFL and college football games in August through a partnership with prediction market Kalshi. Still, Robinhood currently offers prediction markets on other subjects, such as economics, culture, and technology.

Although Robinhood offers commission-free trading on stocks and cryptocurrencies, the firm charges customers a one cent fee on trades involving event contracts, the analysts wrote.

On Monday, Robinhood shares rose more than 5% to nearly $146, according to Yahoo Finance. When the retail brokerage reports third-quarter earnings after markets close on Nov. 5, analysts expect Robinhood to disclose earnings per share of $0.54 on $1.2 billion in revenue.

Compass Point maintained a “buy” rating in its latest HOOD note, pointing to a $161 price target—raised from $105. If reached, that mark would represent a new all-time high price for Robinhood, beating the previous record above $153 from earlier this month.

Robinhood’s prediction markets are gaining traction in the U.S., but the firm is also speaking with UK regulators about bringing them to new markets, Bloomberg reported last month.

Last year, prediction markets had a breakthrough moment in the U.S., as Polymarket and Kalshi processed billions of dollars of wagers on whether President Donald Trump would win re-election. Some said the showing solidified their utility as an alternative to political polls.

Robinhood offered access to prediction markets with only a few weeks left in the presidential contest, following Kalshi’s legal victory over the Commodity Futures Trading Commission. 

The regulator had tried to block Kalshi from offering contracts on the U.S. presidential election in court for years, but its efforts were unsuccessful. After pushing back against a federal judge’s ruling, the CFTC abandoned efforts to appeal the decision in May.

In some ways, the barriers between financial services firms and sports betting companies are blending. Last week, for example, DraftKings tossed its name into the prediction market ring, unveiling its acquisition of prediction market exchange Railbird.

(Disclosure: Decrypt’s parent company, Dastan, is the owner of prediction market Myriad.)