The earnings from Robinhood’s blockchain platform are coming in quickly, though there is no guarantee they will continue at the same pace.
Deutsche Bank has increased its price target for Robinhood Markets (NASDAQ:HOOD) stock to $136 from $115, effective September 4, along with raising its earnings estimates. The move came after the company launched Robinhood Chain and saw a marked increase in activity on that network. The bank pointed to a sharp rise in Chain fee revenue as the driving factor behind both the price target and earnings revisions.
The Fee Run Rate Jump
The figures speak for themselves. Through mid-August, Robinhood Chain’s daily revenue run rate sat below $200,000, according to DeFiLlama data cited by Deutsche Bank. The climb began on August 29, when it shot up to nearly $500,000. Then on August 30, the figure skyrocketed to almost $1 million.
The upward trend continued without pause. On August 31, daily revenue passed the $1.9 million mark, then climbed to $3.38 million by September 1, before reaching $4.01 million on September 2.
What Deutsche Bank Estimates
The German lender Deutsche Bank has estimated that Robinhood could take in roughly $5.4 million from fees tied to the Chain. That figure comes after the firm’s earlier projection of $4.6 million in fee income from the Chain for the whole of Q3. The platform’s growing engagement with the Chain is what prompted the bank to move both its EPS and price target estimates upward for Robinhood.
Transaction fees rise when there is more activity on the network, which would raise Robinhood’s revenue and earnings if the activity continues to grow.
A Short History
The Robinhood Chain has been up and running for a brief period. Its fee revenue has risen quickly over a handful of weeks, which points to considerable initial activity. Yet such a short record does nothing to prove a steady income stream will hold up over time.
Deutsche Bank’s Own Uncertainty
Deutsche Bank has admitted to being unsure about how long its current strength will last. The bank said that even though momentum is running significantly ahead of previous forecasts, visibility into the durability of that momentum remains limited.
The $100-Million Target
Network activity will determine whether Deutsche Bank’s prediction comes true. The bank sees the Chain becoming a $100-million-plus business, but that forecast rests on fees remaining strong. A sharp decline in daily fees would reduce the earnings contribution well below what recent figures suggest.
Should the network maintain a consistently high volume of activity, the Chain stands to develop into a substantial recurring revenue source.
Key Facts Box
- Price target raised to $136 from $115
- Q3 fee revenue previously forecast: $4.6 million
- Recent estimate: $5.4 million in fee revenue
- September 2 daily revenue run rate: $4.01 million
Timeline of Revenue Growth
| Date | Daily Revenue Run Rate |
|---|---|
| Mid-August | Below $200,000 |
| Aug 29 | Nearly $500,000 |
| Aug 30 | Almost $1 million |
| Aug 31 | $1.9 million+ |
| Sept 1 | $3.38 million |
| Sept 2 | $4.01 million |
The Real Test
The question at hand is not about whether Robinhood Chain brings in fees. Rather, it concerns whether the latest rise in network activity can turn into steady growth in earnings.
The chain has already shown its ability to produce income. The unanswered question concerns whether it can sustain that income over time.
Source: finance.yahoo.com
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