Editor’s Note: On September 1, Morgan Stanley upgraded Robinhood’s rating from “Equal Weight” to “Overweight” and raised its price target from $124 to $150, implying approximately a 43% upside from the previous trading day’s closing price. This upgrade came despite a decline in cryptocurrency trading volume and Robinhood’s relatively flat stock performance over the past year, and was not based on a new crypto market rally.

Morgan Stanley is truly reevaluating Robinhood’s ability to monetize its existing user base. As products such as stocks, options, prediction markets, credit cards, retirement accounts, and wealth management are gradually consolidated onto a single platform, Robinhood’s growth strategy may no longer rely primarily on acquiring new users, but rather on retaining more assets with existing customers, increasing trading activity, and encouraging the use of higher-value services.

Prediction markets serve as the most intuitive validation of this logic. Robinhood’s event contract revenue in Q2 reached $1.56 billion, more than ten times year-over-year growth, surpassing stock and cryptocurrency trading revenue during the same period. Morgan Stanley believes that more importantly, this revenue came from fewer than 2 million users, indicating that Robinhood has yet to fully tap into its approximately 28 million existing customers.

However, this remains a valuation framework that requires ongoing validation. Whether the market can sustain its current level of activity, whether users can consistently shift to other financial products, and whether Robinhood can leverage Rothera to extend its distribution advantage to trading infrastructure will determine whether this growth spurt is merely a short-term surge driven by a cyclical event or a structural shift in the platform’s economic model.

The following is the translated text:

Morgan Stanley is reassessing Robinhood's growth potential.

Analyst Michael Cyprys upgraded Robinhood Markets' stock rating from "Hold" to "Buy" and raised the price target from $124 to $150, representing approximately a 43% upside potential based on Robinhood's previous trading day closing price.

The core of this increase is not how many new users Robinhood can acquire, but how much additional revenue the company can generate from its existing users.

Cyprus stated in its report to clients that, as its product portfolio expands, Robinhood is turning faster product iterations into stronger unit economics: customers are holding more assets on the platform, engaging in more active trading, and generating higher revenue per customer. This could extend Robinhood’s growth cycle beyond current market expectations.

The valuation logic has shifted from user growth to per-user monetization.

In the past, Robinhood was often seen as an online brokerage heavily reliant on retail trading sentiment: when markets were active, trading in stocks, options, and cryptocurrencies drove revenue growth; when market conditions cooled, trading volumes and profitability could also come under pressure.

Morgan Stanley believes this understanding may underestimate the changes taking place at Robinhood.

As of the second quarter of 2026, Robinhood's funded customer base increased by 7% year-over-year to approximately 28.4 million; meanwhile, the platform is consolidating products such as stocks, options, cryptocurrencies, retirement accounts, credit cards, investment advisory, and prediction markets into a unified user system.

This means that even if the number of users no longer grows rapidly, Robinhood can still increase revenue per user as customers transfer more assets, increase usage frequency, or begin using new financial services.

Cyprus summarizes it as stronger "customer economic value." From a valuation perspective, the market needs to assess not only how many new customers Robinhood can attract, but also whether existing customers can transition from single-trade users to platform users utilizing multiple financial products.

Less than 2 million users generated $156 million in prediction market revenue.

Prediction markets are the primary example Morgan Stanley uses to illustrate this potential.

Robinhood disclosed that total net revenue for the second quarter of 2026 increased 32% year-over-year to $1.31 billion. Trading-related revenue rose 44% to $776 million. Event contract revenue reached $156 million, more than ten times the year-over-year growth, surpassing stock trading revenue of $129 million and cryptocurrency trading revenue of $100 million during the same period.

Event contracts allow users to take positions on the outcomes of sporting events, economic data, or other real-world events and are the primary product offering in Robinhood's prediction market business.

According to data provided by Cyprys, Robinhood generated the aforementioned $156 million in revenue from fewer than 2 million users, with some participants subsequently adopting other products on the platform. This suggests that prediction markets may serve not only as a direct source of trading revenue but also as an entry point to enhance user engagement and cross-selling capabilities.

However, this inference still requires further data validation. At this stage, it is not possible to predict whether market users will remain long-term based on a single quarter, nor can it be confirmed whether their usage of stocks, options, or asset management products will generate stable incremental revenue.

Rothera extends Robinhood into trading infrastructure.

Another variable Morgan Stanley is monitoring is Rothera.

Rothera is an exchange and clearinghouse jointly operated by Robinhood and Susquehanna International Group, regulated by the U.S. Commodity Futures Trading Commission. Robinhood holds a controlling interest in the joint venture, but Rothera operates under independent management.

In June 2026, Robinhood began routing a portion of its event contract orders for the World Cup and professional baseball to Rothera. Robinhood disclosed that $17 million of its $156 million in event contract revenue for the second quarter came from Rothera-related business.

Previously, Robinhood primarily served as a product distribution platform for retail investors. By engaging in exchange and clearing infrastructure, the company has the opportunity to extend its reach across a longer trading value chain and offer related services to institutional clients such as third-party futures brokers.

From Morgan Stanley’s perspective, this could enable Robinhood to generate additional revenue from trading, clearing, and infrastructure beyond user acquisition. However, Rothera is still in the early stages of business expansion, and its trading volume, third-party customer growth, and actual profitability remain to be seen.

The cooling of crypto trading instead tests the strength of diversification.

This upgrade occurs amid weakening cryptocurrency trading activity, reinforcing the main theme of Morgan Stanley's report.

Robinhood's cryptocurrency trading revenue decreased 38% year-over-year to $100 million in the second quarter; cryptocurrency notional trading volume on the Robinhood app declined 23% quarter-over-quarter, while Bitstamp volume fell 47%. Meanwhile, businesses such as event contracts, stock trading, net interest income, and subscriptions continued to serve as growth drivers.

Therefore, Morgan Stanley’s recent upgrade is not based on an expectation of a rapid rebound in cryptocurrency trading volume, but rather on the belief that Robinhood’s revenue sources are becoming more diversified. Growth in platform assets, increased user trading activity, higher adoption of new products, and infrastructure revenue from Rothera may reduce the company’s reliance on a single trading category.

From a market valuation perspective, Robinhood is seeking to transition from a "seasonal retail brokerage" to a "comprehensive financial platform" valuation framework. However, whether this shift can succeed still depends on several key metrics: whether forecasted market revenue can be sustained after major events, whether existing users continue to adopt additional products, whether platform assets and revenue per user can continue to grow, and whether Robinhood can attract third-party trading volume outside its own ecosystem.

Prediction markets have demonstrated that Robinhood can rapidly generate revenue among a smaller user base. The next question is whether this monetization capability can be replicated across a broader customer base and ultimately translate into stable, sustainable profit growth.