While the Robinhood Trading app has been around since 2013, the company gained notoriety this year as new investors flocked to the app hoping for strong gains during a booming tech-led stock market rally. We get to see the stocks many of their customers are buying as the company publishes a list containing the top 100 popular stocks held by their customers.
Many of them have delivered impressive gains this year, but since 2020 is coming to an end, I thought it would be interesting to go through the list to find stocks that have high growth potential for next year. I did this by focusing on analyst EPS estimates for 2021.
Strong earnings expectations for the full year can sometimes be a precursor for strong price gains. That’s why I focused on established companies, which are covered by more analysts, as opposed to some of the smaller stocks on the list, which may have revenue growth estimates above 2,500%, but haven’t shown positive earnings growth yet. Tesla, Inc. (TSLA), General Electric Company (GE), Walt Disney Company (DIS), and GoPro, Inc. (GPRO) are expected to grow earnings considerably next year, which may lead to substantial gains.
Tesla, Inc. (TSLA)
Every investor knows the year TSLA has been having, up almost 700% for the year. The company has a first-mover advantage in the electric vehicle (EV) space with its high range vehicles, superior technology, and an edge in software. The EV industry has been one of the hottest trends in the market this year, led by TSLA.
The stock’s inclusion in the S&P 500 has also played into its strong performance. The stock saw earnings growth of 104.3% in its most recent quarter. EPS growth is expected to grow 5,625% for the full fiscal year. While that ridiculous earnings growth isn’t expected to continue next year, EPS is still forecasted to grow by 67.7% in 2021, well above many other companies in the Robinhood 100.
This growth is expected to be driven by a ramp-up in Model Y production and increased production levels from its Shanghai Gigafactory. TSLA also has two more gigafactories in Germany and Texas in the works. At its recent Battery Day, the company outlined a plan to reduce battery costs by 56% and boost vehicle range by 54%. This will help widen the competitive gap between TSLA and other EVs.
The stock is rated a “Strong Buy” in our POWR Ratings system. It holds a grade of “A” in every component that makes up the POWR Ratings, including Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is also ranked #1 in the Auto & Vehicle Manufacturers industry.
General Electric Company (GE)
It must seem strange to see GE on a list of high growth stocks as the company has struggled in recent years. But, under CEO Henry Lawrence Culp, Jr., who took the reins in October 2018, GE is on a turnaround plan. Culp was brought in to cut costs and streamline the business, and that’s exactly what he’s been doing. The company is also expected to benefit from an improving business environment with the vaccine rollout.
This has led to a 73.1% gain since September 25th. While earnings are expected to be negative for the current year, they are forecasted to grow a whopping 640% next year. While GE is still in the early stages of its turnaround, the company is poised to benefit from its portfolio-restructuring program and expansion of its digital business.
Analysts have been upgrading their recommendations due to projections of increased future free cash flow. According to the StockNews Price Target feature, fourteen out of twenty-one analysts have a “Strong Buy” or “Buy” recommendation on the stock. All four of its industrial segments are expected to improve. And its finance segment, GE Capital, is expected to benefit from a recovery in commercial aviation, which will drive growth in its aircraft leasing business, GE Capital Aviation Services.
The stock is rated a “Buy” in our POWR Ratings system. It holds a grade of “B” in Trade Grade and Industry Rank.
Walt Disney Company (DIS)
DIS was a stock that I wasn’t high on until recently as the pandemic has hurt its theme parks, movies, and cruise lines businesses. But after its recent Investor Day presentation, where it outlined that it’s extremely popular Disney+ streaming service will become a key growth driver in the future, I changed my tune.
The stock is up 14.6% since Investor Day and 99.7% since its March low. Analysts expect the company to grow earnings 202.5% next year. It’s not hard to see why, as Disney+ now has more than 86 million subscribers. That was initially supposed to be its five-year target (60 million to 90 million). It appears that while the pandemic is hurting its theme parks and movie launches, it’s driving more people to the streaming service.
The company also raised its outlook for subscribers to a range of 230 million to 260 million by 2024. If you include Hulu and ESPN+, the range is between 300 million and 350 million subscribers. Plus, DIS is also raising the price of its service from $6.99 a month to $7.99 per month in March. This will help finance all the content it plans on producing over the next couple of years. Plus, the company will be able to generate revenue from its parks as the vaccine rolls out since the parks are outdoors, and social distancing can be implemented.
The stock is rated a “Strong Buy” in our POWR Ratings system. It holds a grade of “A” in every POWR component, including Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is also ranked #1 in the Entertainment – Sports & Theme Parks industry.
GoPro, Inc. (GPRO)
GPRO is a leading manufacturer of action cameras, mounts, drones, and appliances. The company manufactures mountable and wearable capture devices used in many first-person action videos you may have seen on YouTube or Facebook (FB). Like GE, GPRO is another turnaround story as the company has faced numerous problems, including product recalls, poor product launches, production delays, and missed deadlines.
Its stock peaked shortly after its debut and, for the most part, has been trending downhill since. But things are starting to look better as its stock is up 309.5% since its March low. The company’s biggest issue was its inventory, but its recent change in focus to online sales has provided strong momentum and controlled costs.
Analysts forecast the company to grow earnings 800% next year as GPRO is well-positioned to benefit from its direct-to-consumer sales model and its Plus subscription service. Its subscription service, which includes unlimited video storage in the cloud and discounts on accessories, saw customers increase 65% year over year in the third quarter.
GPRO is also seeing increased demand for its HERO8 Black and HERO9 Black cameras and is working on expanding its footprint in emerging markets. The stock is rated a “Strong Buy” in our POWR Ratings. It holds a grade of “A” in Trade Grade, Buy & Hold Grade, and Industry Rank. It is also ranked #11 in the Technology – Hardware industry.
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TSLA shares . Year-to-date, TSLA has gained 696.01%, versus a 17.57% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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