Why Robinhood Stock Just Popped
Key Points
Robinhood has announced new AI-powered trading tools for Robinhood Gold members.
The company is also rolling out new ways to bet on sports.
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Robinhood (NASDAQ: HOOD) stock is up 2.7% as of 12:40 p.m. ET Thursday. Robinhood investors are reacting to an announcement that first appeared on the company's blog two days ago -- which received wide attention yesterday afternoon:
Robinhood is doubling down on sports betting.
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Robinhood's brain
That's not precisely how Robinhood would describe it, of course. The title of the company's blog post Tuesday used more neutral terms such as "AI innovations" and "prediction markets" to describe the rollout of its "next era of intelligent investing" for customers.
The AI part refers to Robinhood Cortex, an "AI-powered investing assistant" for Robinhood Gold subscribers, which appears designed to convert natural language inquiries into instructions to buy and sell securities under specific conditions. But it's the "prediction markets" bit that I think is really exciting investors this week.
Noting that "prediction markets have become Robinhood's fastest-growing product line by revenue ever, with 11 billion contracts traded by more than 1 million customers," Robinhood is doubling down on sports gambling. Going forward, the company says "customers will be able to trade preset combos for individual Pro Football games," including by betting on "outcomes, totals, and spreads within a single game."
How much money could Robinhood make?
The company plans to further emphasize the sports gambling market going forward, promising to soon provide data on "Anytime TD, Passing Yards, Receiving Yards, Rushing Yards" -- and hinting it may be possible to gamble on these stats as well in the future.
Is all of this moral? Perhaps not, but it does look profitable, and could help Robinhood hit analyst targets for 23% average annual earnings growth over the next five years. On $2.2 billion in trailing profit, that implies nearly $6.3 billion in profit for Robinhood by 2030.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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