Robinhood is a trading application that has become hugely popular among millennial retail investors in the U.S. The stock trading platform aims to democratize finance for all and has been a pioneer of commission-free investing.
While 2020 has been a challenging year for even the most experienced traders, Robinhood investors garnered significant attention after many of their millions of users successfully bought stocks in March amidst the coronavirus sell-off.
Here we look at three stocks that have been a favorite for investors on the Robinhood app and should continue to see gains in 2021 and beyond.
The first stock on this list is PayPal (PYPL), a digital payments company that has absolutely crushed the broader market since going public in July 2015. PayPal stock has returned close to 500% since its IPO and is now valued at a market cap of $240 billion.
While the COVID-19 pandemic decimated multiple sectors, it acted as a tailwind for companies in the fintech space. The shift towards digital payments accelerated in 2020, making PayPal and peers a top bet in a highly uncertain and volatile environment.
Earlier this week PayPal disclosed its Q3 earnings and reported sales growth of 25% year-over-year. Comparatively, adjusted earnings soared 41% to $1.07. It added 15 million active accounts in the September quarter, taking its total to 361 million.
It processed $247 billion in quarterly payments in Q3, indicating a growth rate of 36% year-over-year. The company confirmed that the recent quarter was a record in terms of payment volume and revenue growth.
PayPal also expects revenue growth between 20% and 25% in Q4 and we can see why it is a stock to buy and hold for the next decade.
One of the worst-hit sectors amid the pandemic has been the hospitality and restaurant space. Shares of Starbucks (SBUX) fell from a high of $94 in early 2020 to a multi-year low of $50 in March. As lockdown restrictions were imposed all over the world, Starbucks experienced a massive decline in sales and profitability.
Starbucks ended the quarter with a comparable-store sales decline of 4% for the month of September. This was a massive improvement from the 65% decline experienced at the depth of the pandemic five months back.
Comparable store sales in Q4 were down 9% in the U.S. but was above the company’s guidance. In Q3, this decline stood at 41%. As we inch closer to the end of this dreaded year, Starbucks has forecast sales to grow between 18% and 23% in fiscal 2021, compared to a decline of 14% in 2020. These forecasts have accounted for a reduced seating capacity as well as lower operating hours.
Starbucks has a market cap of $106 billion and is valued at a forward price to sales multiple of 3.7x and a price to earnings multiple of 32x which is reasonable given its estimated growth rates. Analysts expect the company’s earnings to grow at an annual rate of 47% in the next five years.
Beyond Meat (BYND)
The final stock on this list is Beyond Meat (BYND), a company that is successfully disrupting the food space. Beyond Meat is a plant-based meat specialist and is establishing a significant presence in North America. In fact, Beyond Meat products are available in 85 countries all over the world.
The company has almost doubled its sales in the first two quarters of 2020 but similar to other high-growth companies it remains unprofitable. There is a good chance the world will consume less meat by the end of this decade due to health reasons as well as environmental concerns. This means the growth potential for Beyond Meat is exponential and the company is already developing a facility in China to manufacture plant-based meat products.
BYND stock is trading at a forward price to sales multiple of 20.5x which is expensive but growth stocks trade at a premium. Analysts expect its earnings to increase from a loss of -$0.29 in 2019 to $0.63 in 2021.
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PYPL shares were trading at $200.24 per share on Friday morning, down $4.32 (-2.11%). Year-to-date, PYPL has gained 85.12%, versus a 9.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...
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