Robinhood Markets revolutionized the brokerage industry by introducing commission-free trades and democratizing trading. Despite the initial excitement fading, the app-based brokerage remains influential in the stock market, particularly among millennials. With the average age of account holders estimated at 31, Robinhood also provides insights into the top 100 most held stocks on its platform, serving as a valuable resource for investors seeking investment ideas. Here are three notable stocks from Robinhood’s top 100 list that may be worth considering.
Airbnb
Airbnb disrupted the travel industry by popularizing home-sharing, establishing itself as the dominant player in the market. The company boasts several competitive advantages, including network effects and a well-established brand that reduces advertising costs. Its marketplace-based business model allows hosts to handle the bulk of the work, further enhancing efficiency.
Throughout the pandemic, Airbnb made strategic decisions such as staff reductions and cost-cutting measures, enabling it to emerge as a highly profitable company. Over the past four quarters, Airbnb has achieved a remarkable free cash flow margin exceeding 40%. The company has capitalized on the rebound in travel, earning interest on funds held between guest bookings and stays, a unique benefit of its business model. As Airbnb continues to expand, its asset-light model is expected to lead to margin expansion and increased profitability. The company has ambitious plans to extend its business beyond home-sharing, presenting an opportunity for long-term growth and potential success in the stock market.
Carnival
Carnival, the world’s largest cruise line, has experienced significant growth this year, with its stock price more than doubling. The company has witnessed record deposits and bookings as it recovers from the challenges posed by the pandemic. Strong demand for cruises suggests that Carnival is likely to achieve record results throughout 2023, considering that bookings are typically made several months in advance, with the third quarter representing the seasonal peak.
Looking forward, Carnival’s management has issued new long-term guidance, projecting a 50% increase in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) per available passenger berth day (ALBD/APBD) by 2026. This level would mark the highest achieved in almost two decades. Additionally, the company aims to double its return on invested capital (ROIC) to 12% by that time.
Although Carnival faces substantial debt and diluted shareholders during the pandemic, its positive free cash flow of $625 million in the second quarter indicates a path to full recovery. The company’s financials are expected to improve, providing support for further stock growth.
PayPal
PayPal’s stock performance has trailed the market this year following the company’s downward revision of margin expansion guidance in its first-quarter earnings report. Furthermore, concerns about competition from Apple, slowing growth, and the absence of a succession plan for CEO Dan Schulman’s departure at the end of the year have weighed on investor sentiment.
Despite these valid concerns, PayPal’s stock appears to have factored in the challenges, with a bargain price-to-earnings ratio of less than 15 based on forward estimates. The company’s digital payments platform offers scalability, allowing it to grow and gain leverage over time. Products such as Braintree, acquired by PayPal in 2013, are gaining traction and contributing to the company’s success.
As global recession fears subside, PayPal stands to benefit from increased consumer spending. Additionally, the company plans to repurchase $5 billion of its own stock this year, taking advantage of the discounted price. Given PayPal’s favorable valuation and the underlying strengths of its business, it presents a compelling opportunity to outperform the market.
So, Airbnb, Carnival, and PayPal are three Robinhood-listed stocks with promising growth prospects. These companies have unique advantages in their respective industries and exhibit potential for long-term success. As always, it is crucial to conduct thorough research and consider personal investment goals before making any investment decisions.
