Commission-free trading platforms are attracting millennial retail traders in the recent past. One of the best-known is Robinhood, which publishes a ranking of the most-traded stocks on the platform. You can think of them as the top Robinhood stocks to buy.
The big surge in the market post the novel coronavirus triggered meltdown has ensured that investor interest sustains.
According to a note published by Goldman Sachs, the top stocks traded by investors on Robinhood are outperforming those favored by hedge funds and mutual funds since the stock market hit bottom in March.
That doesn’t mean Robinhood is necessarily going to completely upend the world of trading. As Zachary Cohle, assistant teaching professor of economics at Quinnipiac University, wrote in an email to InvestorPlace:
“The effect of new technology is often determined by both the type of technology and the degree of adoption of that technology. While Robinhood has made stock trading more accessible to the average person, it is unclear if a majority of people will begin trading stocks using services like Robinhood. Previous barrier to trading included a lack of both disposable income and free time. These barriers are still in place.”
Still, it’s impossible to deny the appeal and the apparent power of Robinhood story right now. Therefore, it’s worth looking at some of the top stocks traded by Robinhood investors.
Let’s take a closer look at the following Robinhood stocks:
- Alibaba Group Holdings (NYSE:BABA)
- Amazon (NASDAQ:AMZN)
- Moderna (NASDAQ:MRNA)
- Plug Power (NASDAQ:PLUG)
Robinhood Stocks to Buy: Alibaba Group (BABA)
BABA stock, which has moved higher by 60% in the last one year, is among the top three stocks listed as “most popular” on Robinhood website. Currently, the top two are Catalyst Pharmaceuticals (NASDAQ:CPRX) and Corbus Pharmaceuticals (NASDAQ:CRBP).
From a fundamental and growth perspective, BABA stock is attractive for the core portfolio. The Chinese e-commerce giant is likely to report earnings growth of 16.1% on an annual basis for the next five years.
The Chinese e-commerce industry is not the company’s only growth trigger. Alibaba is positioned to benefit from e-commerce growth in Southeast Asia coupled with strong growth in the cloud business. The novel coronavirus pandemic has increased investor interest in the company as online shopping has further gained traction.
I also like Alibaba considering the fact that for fiscal year 2020, the company generated free cash flow of $18.5 billion. With strong financial flexibility, there is headroom for aggressive organic and inorganic growth.
Further, as free cash flows continue to swell, I expect BABA stock to pay dividend in the coming years. That’s another positive trigger for stock re-rating.
Amazon (AMZN)
AMZN stock is also listed among the most popular stocks in Robinhood website with 90% analyst buy rating.
Without doubt, Amazon is a company that every investor needs to consider and include in the portfolio. For the trailing 12 months, the company’s free cash flow was $31.9 billion. This, in itself, provides a strong reason to buy AMZN stock. Shareholder value creation is likely to be significant in the coming years.
The company’s e-commerce business growth has remained stellar. With the coronavirus pandemic, the business is likely to gain further traction. The company is also making strong inroads in high growth markets like India.
Further, Amazon Web Services has continued to deliver healthy numbers. With AWS remaining a leader in public cloud computing, the segment is well positioned to benefit from sustained industry growth. Artificial intelligence is also likely to be a growth catalyst.
The company’s hardware division is another potential revenue growth trigger. Besides Alexa, the company also launched Ring Video Doorbell for improved home security. I expect further growth in the portfolio of devices in the coming years.
Overall, AMZN stock is exciting for short-term as well as long-term investors.
Moderna (MRNA)
As pharmaceutical companies rush to formulate a vaccine for the coronavirus pandemic, the sector has been in focus.
It has attracted the attention of Robinhood investors with companies like Moderna, Pfizer (NYSE:PFE), Gilead Sciences (NASDAQ:GILD) and Inovio Pharmaceuticals (NASDAQ:INO) featuring among the most popular traded stocks.
MRNA stock has surged by 256% in the last six months. Recently, the company signed a supply agreement with the U.S government for an initial 100 million doses of the mRNA vaccine against Covid-19. Adding the previous deals, the government has already committed $2.48 billion for vaccine doses from the company.
This is likely to keep the stock in limelight. Once the company enters the production stage, top-line and earnings growth will provide renewed trigger for upside.
Besides the Covid-19 vaccine, the company also has a development pipeline that includes cancer vaccine, localized regenerative therapeutics and systemic intracellular therapeutics.
Plug Power (PLUG)
PLUG stock has surged by 155% in the last six months. While I would be cautiously optimistic after the big rally, the stock is worth keeping in the radar.
Recently, the company completed the acquisition of United Hydrogen and Giner ELX as a part of its vertical integration strategy. With this acquisition, the company has raised its 2024 revenue guidance to $1.2 billion. The company has also increased the EBITDA guidance to $250 million for the same year.
Clearly, if growth gains traction, PLUG stock is likely to surge higher. It remains to be seen if the business is scalable. However, the stock will continue to provide exciting trading opportunities. In addition, some long-term exposure can be considered on declines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector. As of this writing, he did not hold a position in any of the aforementioned securities.
