Prediction markets for NFL and other events are already a $200 million business for Robinhood, says Piper Sandler

Robinhood is experiencing substantial revenue growth from prediction markets, estimated at $200 million, prompting Piper Sandler to lift its price target to $140 from $120 with an Overweight rating. This upside is largely attributed to its 50-50 revenue share partnership with Kalshi, which is experiencing record volumes, particularly in sports-related contracts. While regulatory challenges concerning Kalshi's sports offerings in some U.S. states pose a potential risk, the strong performance underpins a broader positive analyst sentiment, with two-thirds rating the stock a buy or strong buy, following its over 200% year-to-date surge.

Analysis

Robinhood's venture into prediction markets is emerging as a significant revenue contributor, with Piper Sandler estimating sports betting activities have already generated approximately $200 million for the platform. This growth is driven by a 50-50 revenue-sharing partnership with Kalshi, which is reportedly on track for record monthly volumes fueled by new NFL and NCAA-related contracts. Citing this upside, Piper Sandler has raised its price target on HOOD to $140 from $120, maintaining an 'overweight' rating and implying a 12% upside. This optimistic outlook is tempered by a key regulatory risk, as several state regulators have ordered Kalshi to halt sports wagers, citing non-compliance with local gaming laws—a challenge Kalshi is contesting legally. Despite this uncertainty, the positive sentiment is broadly shared, with LSEG data showing two-thirds of the 23 analysts covering the stock rate it a 'buy' or 'strong buy,' contextualizing the stock's over 200% year-to-date surge.

Key Decisions for Investors

• Investors should recognize the new prediction markets partnership as a material growth catalyst, supported by strong initial revenue estimates of $200 million and a consensus 'buy' rating from analysts.
• The primary risk factor to monitor is the ongoing legal challenge between Kalshi and state regulators; an unfavorable outcome could jeopardize this new revenue stream and negatively impact HOOD's growth trajectory.
• Considering the stock has already rallied over 200% year-to-date, it is prudent to weigh the positive outlook from the new revenue stream against the potential for increased volatility stemming from the identified regulatory overhang.