Robinhood investors have already proved that they have a knack of picking stocks that outperform. Investors need to do their homework before investing or trading in any stock. However, it makes sense to keep a watch on the Robinhood stocks that the platform’s investors are picking.
With several new initial public offerings this year, there are stocks that have not yet come to limelight. However, some of these stocks are already being actively traded by Robinhood investors.
I believe that these companies can provide good near-term trading opportunities. At the same time, investment in these stocks can be considered for the long-term.
Let’s take a look at the four new stocks to buy at current levels.
4 New Robinhood Stocks to Watch: Snowflake (SNOW)
Snowflake is a provider of cloud-based data platform. SNOW stock was listed in September on the New York Stock Exchange in a volatile IPO. It didn’t take long for the stock to come in the radar of Robinhood investors.
Being in the cloud business, the company is already on a high growth trajectory. For the second quarter of 2021, the company reported revenue of $133 million. On a year-on-year basis, revenue growth was 121%.
Customer acquisition has been strong. As of July 2020, the company had doubled its customer count year-on-year, to 3,117 customers as compared to 1,547 in July 2019. Even that was nearly twice the 948 that it started the year with. If this continues, I expect top-line growth to remain healthy. It’s not surprising that Robinhood investors have been trading SNOW stock.
Snowflake believes that the total market size for cloud data platform is $81 billion. Based on Q2 2021 numbers, the company’s annualized revenue is just $500 million. This provides immense scope for revenue upside even if Snowflake captures only a 5% market share in the coming years. And the company has the financial flexibility for aggressive innovation driven growth.
SNOW stock had touched an all-time high of $319. Currently, the stock trades at $264 and I believe that the correction is a good opportunity to accumulate. The company’s Q3 2021 results are due for release in the first week of December. That is likely to be the next trigger for stock upside.
GoHealth is another relatively new listing that has come in the radar of Robinhood investors. While GOCO stock has corrected significantly from highs above $26, I believe that the business has potential. GOCO stock looks undervalued and can trend higher from current levels of $11.60. The valuation factor implies that GOCO is among the top new stocks to buy.
The health insurance marketplace uses data science and industry expertise to match customers with the healthcare policy and carrier that is best for them. Medicare makes up a bulk of the company’s revenue and this is a high-growth market.
To put things into perspective, 10,000 Americans are turning 65 every day. The company believes that the total addressable market is in excess of $28 billion.
Given the big opportunity, GoHealth should continue to deliver strong results in the coming years. For the first half of 2020, the company reported revenue growth of 87% and adjusted EBITDA growth was 154%.
It’s also worth noting that the company generated 70% of revenue from internal channels in 2019. Those channels generate higher margin than external channel revenue. With a strong base of in-house agents, the company is positioned to steadily improve on the EBITDA margin.
Vroom was another 2020 initial public offering in that’s attracted the attention of Robinhood investors. VRM stock had touched a high of $75 after the IPO. However, after a follow-on offering (equity dilution), the stock currently trades around $40 a share. I believe that current levels are attractive for accumulating the stock.
As an overview, the company is involved in the buying, selling and trading of new and used cars through its e-commerce platform. A CarsGuru.com survey earlier this year revealed that 61% of respondents are open to buying a car through an online platform.
The used automobile market is worth $841 billion. However, the e-commerce penetration of the used auto market is less than 1%. This is an indication of the potential the company’s business holds in the coming years. With the company having a nationwide delivery of cars, there is a big addressable market.
It’s also worth noting that the company’s business model is asset-light with no balance sheet debt. Shareholder value creation is bound to happen as the business gains traction and cash flows increase.
For Q2 2020, the company’s revenue increased by 45.2% to $145.6 million. The quarter was hurt by the COVID-19 triggered lock-down. I would not be surprised if Vroom’s top-line growth exceeds 50% in the coming quarters.
To be sure, adjusted EBITDA is still in red. I believe that as sales volumes grow in the coming quarters, it will turn adjusted EBITDA positive. This will be a key stock upside trigger.
Li Auto (LI)
Li Auto is another attractive name among new stocks to buy. LI stock also features in the list of “New on Robinhood” stocks. I see it as worth considering as a long-term holding.
As an overview, Beijing-based Li Auto designs, develops and manufactures premium smart electric SUVs. The company started the production of its first model, Li ONE, in November 2019.
For Q1 2020, Li delivered 2,896 vehicles. Over the next two quarters, deliveries increased to 6,604 and 8,660, respectively. That’s fairly strong traction for those SUVs.
As of October 2020, the company had 41 retail stores in 36 cities in China. With aggressive plans to expand the number of stores, I expect sustained growth in vehicle deliveries. As China’s economy bounces back, expansion of its product line, including autonomous driving solutions, will drive long-term growth.
Currently, new energy vehicles are just 5% of total car sales in China. By 2025, the target is to increase new energy vehicle sales to 20% of total car sales. Given this ambitious target by the government, Li Auto stands to benefit.
LI stock can be a potential multiplier in the coming years.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.