StoneX sees 45% upside for Robinhood, points to accelerating Layer 2 chain and prediction markets

StoneX Financial, the brokerage and equity research arm of StoneX Group, has given Robinhood a Buy rating and a $170 price target, citing its new Layer 2 chain and prediction markets business as key growth drivers.

In a Tuesday research note initiating coverage of Robinhood, Mark Palmer, managing director and senior research analyst at StoneX, wrote that nearly every operating metric at the company is "accelerating."

Robinhood shares (HOOD) closed down 3.91% at $117.34 on Tuesday. StoneX's price target implies about 45% upside from the current price level.

Robinhood's second-quarter revenue grew 32% year-on-year to $1.31 billion while cryptocurrency revenue fell 38%, "leaving crypto at 8% of net revenues against 16% a year earlier," Palmer said.

Palmer highlighted Robinhood's expansion beyond retail trading services. "The company has been buying its way into exchange and blockchain infrastructure at software margins," he wrote. The company's Robinhood Chain, which went live on mainnet on July 1, has collected more gas fees over a trailing 24-hour period than any other Ethereum Layer, according to the report. 

The chain's daily fees reached roughly $4.59 million by Sept. 3, and its annualized revenue neared $39 million as of Aug. 29. StoneX also modeled that Robinhood Chain could generate $980 million in revenue by fiscal year 2029 at an 85% margin.

Prediction markets

StoneX also identified prediction markets as a key growth pillar. In the second quarter, Robinhood saw 13.6 billion event contracts traded, and during the World Cup alone, over 5 billion contracts were traded. That brought in about $156 million in revenue, a 50% increase from the previous quarter.

On Tuesday, Robinhood announced a deal with both Crypto.com and OG.com to expand its prediction markets offering. Robinhood said it will take equity stakes in both companies and route a selection of event contracts to OG.com.

"Routing event contracts to multiple venues helps create a stronger, more diverse and resilient marketplace," JB Mackenzie, VP and GM of futures and prediction markets at Robinhood, said in a Tuesday statement. "With football back and midterms fast approaching, we're thrilled to team up with Crypto.com and OG.com for what is sure to be an exciting fall for prediction markets on Robinhood."

Earlier this week, Bernstein analysts also maintained an Outperform rating and $160 price target for Robinhood, implying roughly 31% upside from Tuesday's closing price.