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On Tuesday, JMP Securities analysts highlighted the growing interest in prediction markets following the November presidential election and its potential impact on the gaming industry. The success of prediction market companies such as Kalshi, PredictIt, Polymarket, and Robinhood (NASDAQ:HOOD) has sparked a surge of attention in the traditional online gaming sector. Major gaming operators like MGM Resorts (NYSE:MGM) have seen significant market movements, with MGM's stock down over 43% in the past year amid this evolving landscape. The analysts noted the increased inquiries into these markets cannot be overlooked.
The analysts pointed out that prediction markets and exchanges have existed in several U.S. states, and the recent acceptance of online wagering presents an opportunity for the sports betting industry. The potential for a new revenue stream and cross-selling avenues is linked to the ability to increase liquidity across state lines. However, mainstream gaming operators like FanDuel and DraftKings (NASDAQ:DKNG) have held back on launching their offerings due to legal uncertainties. According to InvestingPro data, established players like MGM maintain strong fundamentals with a healthy current ratio of 1.3 and positive earnings of $2.42 per share over the last twelve months.
Recent actions by states issuing cease-and-desist letters to existing prediction market companies have further complicated the landscape. The Commodity Futures Trading Commission (CFTC) is scheduled to hold a roundtable on April 30th, which is expected to provide clarity on whether outcome markets will be permitted to operate federally.
JMP Securities aims to equip investors with a basic understanding of the mechanics of this new vertical as the industry awaits the regulatory ruling in the coming weeks. This anticipation is set against a backdrop of legal challenges and regulatory scrutiny that prediction market companies currently face.
In other recent news, MGM Resorts International reported robust fourth-quarter earnings, with property-level EBITDAR reaching $1.24 billion, surpassing expectations. JPMorgan responded by raising its price target for MGM Resorts to $52, maintaining an Overweight rating, citing strong performance in Las Vegas and Macau. CFRA also upgraded MGM Resorts' stock rating from Hold to Buy, increasing the price target to $45, following impressive earnings and a strategic share buyback program. Mizuho (NYSE:MFG) Securities further raised the price target to $60, maintaining an Outperform rating, due to anticipated cost savings and strong player volumes.
In addition to financial updates, MGM Resorts announced a new partnership as an Official Partner of the College Basketball Crown, a post-season tournament featuring 16 elite college teams. This collaboration will see MGM hosting the tournament at its Las Vegas venues and providing accommodations for the teams. The company will gain significant visibility through courtside signage and digital content during the tournament. Furthermore, MGM Resorts expanded its Board of Directors by appointing Dame Donna Langley, Chairman of NBCUniversal Entertainment & Studios, bringing valuable entertainment industry expertise to the board. These recent developments reflect MGM Resorts' strategic efforts to enhance its entertainment offerings and financial performance.
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