The online investing app Robinhood has been a clear pandemic winner. As more Americans were forced to work from home, many made the decision to begin testing their investing skills by trading stocks. Robinhood appeals to millennial and/or novice investors for several reasons. First, the app makes it fun. You might say it “gamefies” stock trading. With commission-free trades, investors have an incentive to trade frequently. And many users of the app do just that.
The second reason is that it allows investors to buy partial (or fractional) shares. Although Robinhood is often associated with penny stocks, the app lets investors buy shares of “pricey” stocks like Tesla (NASDAQ:TSLA) without having to pay for a full share right away.
And data shows that Robinhood investors have a healthier risk appetite than other investors. And that appetite has increased since the start of the pandemic. This lines up to the time when investors had more time on their hands.
With that said, many Robinhood investors have been, quite frankly, using the app to engage in a legal form of gambling. I say this because trying to dive quickly in and out of the market in an attempt to capture a profit may work. But historically, it’s a path to ruin.
However there are two sides to every story. And the same is true of Robinhood investors. There are many examples of where these investors have gotten it right. In this presentation, we’ll show you eight examples of stocks that the market and Robinhood investors have gotten exactly right.
Quick Links
- Amazon
- Microsoft
- Beyond Meat
- Peloton
- DraftKings
- Square
- Nvidia
- Netflix
#1 - Amazon (NASDAQ:AMZN)
As of this writing, Amazon (NASDAQ:AMZN) is the seventh most popular stock on Robinhood. You know things are going well when the e-commerce giant had to hire 175,000 new employees to keep up with the pandemic demand. In the most recent quarter for which the company reported earnings, they posted net income of $5.2 billion on sales of $89 billion. The revenue was a 40% year-over-year increase which speaks to just how strong the demand was.
Online spending was increasing prior to the pandemic. However, it is likely that we’ve reached an inflection point and the e-commerce everything economy is now upon us. Which is why investors shouldn’t be too concerned about Amazon’s e-commerce revenue declining anytime soon.
But online shopping is only one reason to like Amazon. The company’s cloud division Amazon Web Services (AWS) has the highest market share in the global cloud infrastructure market, and with33% of the market, there’s no competitor particularly close. In fact, AWS makes up approximately 57% of the company’s operating income.
This is not a cheap stock by any measure. But it’s a stock that has consistently shown its ability to deliver increasing sales and earnings, and it shows no signs of slowing down.
About Amazon.com
Amazon.com, Inc engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Echo, Ring, Blink, and eero; and develops and produces media content.
Read More - Current Price
- $224.92
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 42 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $243.00 (8.0% Upside)
#2 - Microsoft (NASDAQ:MSFT)
Amazon is number on in the global cloud market, but Microsoft (NASDAQ:MSFT) is number 2. And with 18% of the market, you can make a case that Microsoft’s Azure is – to steal from Avis – trying harder. In fact, Microsoft is the sixth among the top Robinhood stocks, one spot above Amazon.
The company’s cloud business has gotten a huge assist from the necessity for businesses of all sizes to adapt to a work-from-anywhere model. This has created more widespread adoption of its Teams software-as-a-service (SaaS) product.
In July Microsoft closed out its fiscal year by announcing its commercial cloud business exceeded $50 billion in revenue which was a 36% YOY increase.
Microsoft is also expecting to have a robust holiday season with the release of its latest version of its Xbox gaming console. The pandemic has also boosted subscriptions in Xbox Game Pass to record levels. And the company’s xCloud gaming service is now live in 15 countries and will soon be available on Game Pass which will allow users to stream games on their mobile devices.
About Microsoft
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Read More - Current Price
- $436.60
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 26 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $508.46 (16.5% Upside)
#3 - Beyond Meat (NASDAQ:BYND)
Ok, if Amazon and Microsoft seemed rather obvious selections, here’s one that may not. Beyond Meat (NASDAQ:BYND) has been a volatile stock since its initial public offering in 2019. But it’s hard to question what the company has done in 2020. BYND stock has nearly doubled this year despite the global pandemic.
One reason for this has been that meat prices soared during the pandemic as processing plants were disrupted due to Covid-19. This gave Beyond Meat an important opportunity to get people to sample its products. And it made the company’s prices, which may have been an inhibiting factor, seem much more appealing.
But organic growth alone hasn’t been the only driver of this company’s success. The company continues to expand its product offerings and is generating a footprint in China and Canada.
Beyond Meat appeals to the younger investors of Robinhood because of its commitment to plant-based foods. These investors are much likely to put their money where their values are and it shows.
To be sure, the long-term fortunes for Beyond Meat remain a little unclear. More competition is moving into the plant-based meat category. And the company is in a race to differentiate its products beyond price. But in terms of stocks that are winning right now, you’d have to say that Robinhood investors have it right.
About Beyond Meat
Beyond Meat, Inc, a plant-based meat company, develops, manufactures, markets, and sells plant-based meat products in the United States and internationally. The company sells a range of plant-based meat products across the platforms of beef, pork, and poultry. It sells its products through grocery, mass merchandiser, club stores, and natural retailer channels, as well as various food-away-from-home channels, including restaurants, foodservice outlets, and schools.
Read More - Current Price
- $3.55
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 3 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $5.50 (54.9% Upside)
#4 - Peloton (NASDAQ:PTON)
Another stock that Robinhood investors have been snapping up is Peloton (NASDAQ:PTON). In fact, Peloton is the ninth most popular stock on the trading app.
Peloton, if you’ll recall started off the year with a bit of controversy stemming from its holiday ad. But, as it turns out the Peloton couple (or at least the company) is getting the last laugh. To be fair, nobody could have predicted the incredible catalyst that Peloton received at the expense of gyms and fitness clubs. Many of those workout spots may never reopen. And in the meantime, many fitness enthusiasts have had the opportunity to test drive Peloton’s products as well as its community feel.
And it seems they’re liking it. In its most recent earnings report, the company reported that its subscriber base had climbed to 1 milllion users and increase of 113%. Overall, the company has 3.1 million global subscribers.
Cynics may site that we’ve seen this before. And fitness equipment has frequently the casualty of failed new year’s resolutions. But the fitness trend in this country is still expanding. The only question is the methods that consumers are using. Will consumers remain committed to Peloton after the pandemic subsides? That’s hard to say. But with the stock up 206% for the year, I’d say it’s been a great investment.
About Peloton Interactive
Peloton Interactive, Inc operates interactive fitness platform in North America and internationally. The company offers connected fitness products with touchscreen that streams live and on-demand classes under the Peloton Bike, Peloton Bike+, Peloton Tread, Peloton Tread+, Peloton Guide, and Peloton Row names.
Read More - Current Price
- $9.38
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 16 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $6.97 (25.7% Downside)
#5 - DraftKings (NASDAQ:DKNG)
Rounding out the top 25 of Robinhood top stocks is DraftKings (NASDAQ:DKNG). The stock is up nearly 375% for the year. Even when live sports were shut down, Robinhood investors were buying this stock, and with good reason. The long-term case for this case changed dramatically when the National Football League (NFL) made it clear that they are embracing legalized gambling.
Yes, the company lost March Madness and professional basketball, hockey and baseball were on pause. But it was only a matter of time. And investors were rewarded for their patience.
But a major catalyst or DraftKings is fantasy football. A significant catalyst for the company’s business model is daily and weekly fantasy football contests. And now with the NFL in full swing, it looks like all systems are go for DraftKings.
This is an area that is growing very competitive so like a couple of other stocks we’ve already mentioned, the long-term growth of the stock is unclear. However there’s no reason to believe the stock will be slowing down anytime in the near future. Robinhood investors bet on DraftKings and got it right.
About DraftKings
DraftKings Inc operates as a digital sports entertainment and gaming company in the United States and internationally. It provides online sports betting and casino, daily fantasy sports, media, and other consumer products, as well as retails sportsbooks. The company also engages in the design and development of sports betting and casino gaming software for online and retail sportsbooks, and iGaming operators.
Read More - Current Price
- $40.35
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $51.00 (26.4% Upside)
#6 - Square (NYSE:SQ)
Square (NYSE:SQ) is another top 50 Robinhood stock and it makes sense. Milleniall investors have grown up with financial technology (fintech). Many of these investors are embracing the gig economy and are the reason the words “side hustle” have gained in popularity. And if these investors are running a business, they are probably using Square to help them process payments.
Speaking of running a business, Square has made noticeable strides to provide additional small business tools that are allowing the company to compete with other fintech providers such as PayPal (NASDAQ:PYPL). One example is the company’s CashApp which is allowing for peer-to-peer payments and has been attracting analysts who are upgrading the stock.
Square also allows for bitcoin transactions. Right now bitcoin doesn’t amount to a significant portion of the company’s revenue. However, it’s another way that the company is on the leading edge of the growing fintech sector.
The company is also investing heavily into social justice initiatives which should keep the company top-of-mind for these investors.
Square stock is up 135% for the year.
About Block
Square, Inc provides payment and point-of-sale solutions in the United States and internationally. The company's commerce ecosystem includes point-of-sale software and hardware that enables sellers to turn mobile and computing devices into payment and point-of-sale solutions. It offers hardware products, including Magstripe reader, which enables swiped transactions of magnetic stripe cards; Contactless and chip reader that accepts EMV® chip cards and Near Field Communication payments; Chip card reader, which accepts EMV® chip cards and enables swiped transactions of magnetic stripe cards; Square Stand, which enables an iPad to be used as a payment terminal or full point of sale solution; and Square Register that combines its hardware, point-of-sale software, and payments technology, as well as managed payments solutions.
Read More - Current Price
- $89.65
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 26 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $96.33 (7.5% Upside)
#7 - Nvidia (NASDAQ:NVDA)
With several quality semiconductor stocks to choose from, Nvidia (NASDAQ:NVDA) falls in the top 20 of popular Robinhood stocks.
Semiconductor stocks have been some of the hottest stocks in 2020 and with good reason. The 5G revolution has finally arrived and companies like Nvidia have played a significant roll in the buildout of the 5G infrastructure. But that’s not the only reason. Semiconductor stocks are enjoying a perfect storm that is coming from the continued growth of data centers as well as the new hardware cycle in gaming consoles. And although Nvidia doesn’t benefit from all of these segments equally it’s been a solid performer.
The stock is up 108% on the year and that’s despite the September selloff that has knocked the stock down over 12%. As I mentioned, it’s been a perfect storm of catalysts for this notoriously cyclical market segment. So in no way should Robinhood investors expect this kind of performance every year. However, those investors that have been buying NVDA stock have reason to cheer both now and most likely into 2021.
About NVIDIA
NVIDIA Corporation provides graphics and compute and networking solutions in the United States, Taiwan, China, Hong Kong, and internationally. The Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU or vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building and operating metaverse and 3D internet applications.
Read More - Current Price
- $134.70
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 40 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $164.15 (21.9% Upside)
#8 - Netflix (NASDAQ:NFLX)
The last stock is one of the obvious stay-at-home stock winners. Netflix (NASDAQ:NFLX) stock has climbed over 40% this year as millions of Americans had far more time on their hands than they wanted. And when they weren’t riding their Peloton bikes (or maybe while they were) they were watching Netflix. And a lot of it.
A successful 2020 was not a foregone conclusion. The company was feeling the pressure of developing original content. This was creating stress on the company’s bottom line. And original content will be key to the company’s present and future. The competition in the streaming space continues to increase. And as it does many services are pulling back the syndicated programs they had given Netflix the rights to use. Friends has already departed Netflix and The Office will leave in 2021. But Netflix has had a chance to reconnect with its current base and add new customers along the way. Do I expect 40% growth in the stock going forward? I do not. But the revenue growth in 2020 has given Netflix the time to get its next round of original content developed, which should keep subscriber numbers stable.
About Netflix
Netflix, Inc provides entertainment services. It offers TV series, documentaries, feature films, and games across various genres and languages. The company also provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, TV set-top boxes, and mobile devices.
Read More - Current Price
- $909.05
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $807.70 (11.1% Downside)
The long-term impact of Robinhood is already being made clear. Many brokerages are now offering zero-commission trading just to compete. Charles Schwab (NYSE: SCHW) has recently announced that it will be offering customers to buy “slices” of shares. No doubt, a move that its making to compete with Robinhood.
With that said, the market has been filled with Robinhood failures as much as successes. Robinhood has given investors an opportunity to speculate on many penny stocks. Some have worked out. Some have not worked out so well. And that should be a reminder that investing is not the same as gambling. The fundamentals of companies matter.
I am all for services that get individuals to embrace the opportunity that the stock market can provide. And in a few years, we will all probably be impressed with how well Robinhood traders are doing. And if you look at this list of eight stocks, it seems they’re already doing pretty well.
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