Morgan Stanley is rethinking Robinhood’s growth runway.
Analyst Michael Cyprys upgraded Robinhood Markets to Overweight from Equal Weight and lifted his price target to $150 from $124. Based on Robinhood’s previous trading day close, the new target implies about 43% upside.
The heart of the upgrade is not how many new users Robinhood can still add. It is how much more revenue the company can generate from the users it already has.
The valuation case is shifting toward monetization per customer
In a note to clients, Cyprys said Robinhood is turning fast product iteration into stronger unit economics at the customer level as its product lineup expands. Users are keeping more assets on the platform, trading more actively, and producing more revenue per account. In his view, that could leave Robinhood with a longer growth cycle than the market currently expects.
Robinhood has often been treated as a retail brokerage tied closely to swings in individual investor sentiment. When markets are active, stocks, options and crypto help drive revenue higher. When activity cools, trading volumes and profitability can come under pressure as well.
Morgan Stanley said that framing may now understate the changes taking place at the company.
As of the second quarter of 2026, Robinhood’s funded customer base had grown 7% year over year to about 28.4 million. At the same time, the platform has been bringing stocks, options, crypto, retirement accounts, credit cards, advisory products and prediction markets into the same user system.
That creates a different setup. Even if user growth no longer runs at a high rate, Robinhood could still raise revenue per customer if users move in more assets, increase engagement, or begin using additional financial products.
Cyprys described that as stronger customer economics. For valuation purposes, the market is no longer judging only how many new customers Robinhood can attract. It also has to judge whether existing users can evolve from single-product traders into broader platform customers using multiple financial services.
Less than 2 million users generated $156 million in event-contract revenue
Prediction markets are Morgan Stanley’s clearest example of that potential.
Robinhood said total net revenue in the second quarter of 2026 rose 32% year over year to $1.31 billion. Transaction-based revenue increased 44% to $776 million. Event-contract revenue reached $156 million, up more than tenfold from a year earlier, topping the company’s $129 million in stock-trading revenue and $100 million in crypto-trading revenue for the same period.
Event contracts let users take positions on the outcomes of sports matches, economic releases and other real-world events, and they are the main format inside Robinhood’s prediction-market business.
According to figures cited by Cyprys, fewer than 2 million Robinhood users generated that $156 million in revenue, and some participants later began using other products on the platform. On that reading, prediction markets may do more than add direct trading revenue. They may also serve as a channel for higher engagement and cross-selling.
That thesis still needs more evidence. One quarter is not enough to show whether prediction-market users will remain active over time, or whether their use of stocks, options or asset-management products can turn into a stable source of incremental revenue.
Rothera adds an infrastructure angle
Morgan Stanley also pointed to Rothera as another variable worth watching.
Rothera is an exchange and clearinghouse jointly operated by Robinhood and Susquehanna International Group and regulated by the U.S. Commodity Futures Trading Commission. Robinhood is the controlling party in the venture, though Rothera is managed independently.
In June 2026, Robinhood began routing some World Cup and professional baseball event-contract orders to Rothera. The company said $17 million of the quarter’s $156 million in event-contract revenue came from Rothera-related business.
Robinhood previously operated mainly as a consumer-facing distribution platform. By extending into exchange and clearing infrastructure, the company could reach a longer stretch of the trading chain and offer related services to institutional clients such as third-party futures commission merchants.
In Morgan Stanley’s view, that could give Robinhood additional revenue streams from trading, clearing and infrastructure beyond its user entry point. Even so, Rothera is still early in its expansion, and its trading scale, third-party client growth and actual profitability remain open questions.
Cooling crypto activity put diversification in focus
The upgrade came as crypto trading weakened, which reinforces the bank’s main argument.
Robinhood’s crypto-trading revenue fell 38% year over year to $100 million in the second quarter. Notional crypto trading volume on the Robinhood app fell 23% quarter over quarter, while Bitstamp volume dropped 47%. At the same time, event contracts, stock trading, net interest revenue and subscriptions continued to provide growth.
That means Morgan Stanley is not making a call on a quick rebound in crypto volumes. The bank is arguing instead that Robinhood’s revenue mix is becoming more diversified. Growth in platform assets, stronger user activity, deeper product penetration and possible infrastructure revenue from Rothera could reduce the company’s dependence on any single trading category.
From a market-pricing standpoint, Robinhood is trying to move from the valuation framework of a cyclical retail broker to that of an integrated financial platform.
Whether that shift holds will depend on several markers: whether prediction-market revenue can stay up after major sporting events end, whether existing users keep adopting more products, whether platform assets and revenue per customer continue to rise, and whether Rothera can attract third-party trading flow from outside Robinhood’s own ecosystem.
Prediction markets have already shown that Robinhood can create revenue quickly from a relatively small user group. The next question is whether that monetization can spread across a broader customer base and turn into durable, repeatable earnings growth.