Robinhood’s zero-commission investing and trading services have garnered the attention of many investors across the United States, particularly appealing to millennial traders that look to minimize expenses on their investments. The pandemic driven lockdown and thereby surging unemployment rates paved the way for many Gen Y individuals to try their hand at day trading to profit off of the soaring stock markets, causing Robinhood’s payment order flow to double in just three months to $180 million in the quarter that ended June 2020.
President Trump’s advocacy regarding the stock market performance also generated substantial investor confidence over the past couple of months, attracting more and more people to invest in the market. Trump has, time and again, touted the impressive stock market rally this year, which has added onto the wealth of millions of people’s 401ks. His tweets regarding a probable direct $1,200 fiscal stimulus transfer a few days ago led S&P 500 and Dow Jones Industrial Average to soar within minutes of the announcement.
Though currently lagging behind Biden according to recent polls, Trump is backed up by immense voter confidence across the country, as reflected by gatherings of thousands in his rallies. His administrative plans such as lower taxes and trade deals go well with Fortune 500 companies. Trump’s tax cut plan, which was effective 2018, reduced corporate taxes from 35% to 21%, allowing companies to generate higher profits. His plan to make the United States a self-sustaining economy through reduction in imports and renegotiated trade deals is expected to help domestic giants such as Walmart, Inc. (WMT), Microsoft Corporation (MSFT), and General Motors Company (GM) reach new highs through market expansion and global penetration.
Walmart, Inc. (WMT)
As the biggest retailer and wholesaler of goods and services in the United States, and with a global market presence, WMT has emerged as one of the favorite picks of millennials. Consistently ranking in the Robinhood 100 List, WMT is known for its consistently impressive performance throughout the years, particularly during the pandemic. WMT is the largest company in the world in terms of revenue, and has retained this position for six years in a row.
To compete with its biggest competitor, Amazon, Inc. (AMZN), WMT recently launched Walmart+, a subscription membership culminating delivery offering, scan and go, online shopping, and fuel discounts integrated in one platform. This subscription service is relatively cheaper than Amazon Prime, giving WMT an edge.
On September 20th, WMT and Oracle received temporary approval from the government to acquire 20% of ByteDance, the parent company of TikTok. The United States is the leading market based on TikTok iOS revenue, with approximately $50.4 million user spending as of February 2020. TikTok’s seemingly large user base in the country should help WMT multiply its revenues through this investment.
WMT’s revenues (constant currency) increased 7.5% year-over-year to $140.20 billion in the fiscal second quarter that ended July 2020. This growth can be ascribed to a 9.3% rise in US comparative sales, and a 97% rise in e-commerce sales over this period. Adjusted operating income (constant currency) rose 18.6% from the same period last year to $6.60 billion, while EPS grew 80.3% from the prior year quarter to $2.29.
The consensus EPS estimate of $1.18 for the ongoing quarter ending October 2020 indicates a slight improvement from the year-ago value. Nonetheless, WMT has an impressive earnings surprise history, as it beat the street EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenues to increase 3.1% in the ongoing quarter to $131.97 billion.
The company’s impressive price performance over the past couple of months reflects solid growth momentum, making it an actively traded stock listed on Robinhood 100 most popular stocks. WMT has gained more than 45% since hitting its 52-week low of $102 in March. The stock hit its 52-week high of $151.33 in September.
How does WMT stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
A for Industry Rank
B for Overall POWR Rating.
The stock is also ranked #5 out of 18 stocks in the Grocery/ Big Box Retailers industry.
Microsoft Corporation (MSFT)
MSFT has been a long-standing favorite for young tech-savvy investors. The stock’s popularity rose amid the pandemic, as the tech boom earlier this year garnered attention from many Robinhood users looking to capitalize on the prevailing market trends. Their bet on MSFT turned out to be fruitful, as the stock returned more than 75% since hitting its 52-week low of $132.52 in March. MSFT hit its 52-week high of $232.86 in September.
The company’s recent earnings release has made it the 9th most actively traded stock on the Robinhood platform. MSFT’s quick adaptation to the changing market trends have led to a 12% year-over-year increase in revenues to $37.20 billion in the fiscal first quarter that ended September 2020. This is mainly driven by the surging demand in its cloud computing offerings, as Azure revenue grew 48% from the prior-year quarter.
Higher unemployment rates also drove the job search traffic over this period, leading to 16% year-over-year rise in LinkedIn revenue. With people shifting to working and learning from home, the demand for Microsoft Office consumer and commercial products rose significantly as well. Office 365 commercial revenue increased 21%, while Office Consumer products and cloud services revenue grew 13% over this period.
MSFT’s net income grew 30% to $13.90 billion, while EPS rose 32% to $1.82. In fact, the company beat the consensus EPS estimates by 18.2%, increasing its appeal to investors on the Robinhood platform.
The consensus EPS estimate of $1.63 for the fiscal second quarter ending December 2020, indicates a 7.9% improvement from the year-ago value. Moreover, MSFT beat the street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $40.20 billion indicates 8.9% growth from the same period last year.
It’s no surprise that MSFT is rated “Buy” in our POWR Ratings system, with an “A” for Trade Grade, and a “B” for Buy & Hold Grade, Peer Grade, and Industry Rank. It is also ranked #10 out of 96 stocks in the Software – Application industry.
General Motors Company (GM)
GM’s miraculous recovery from almost being bankrupt to regaining its glory as one of the top three automobile manufacturers in the country has struck a chord with the youth. Also, as millennials comprise the largest demographic advocating climate change, GM’s recent partnership with Nikola Corporation (NKLA) has also solidified the faith of most Robinhood investors, making it one of the top 15 actively traded stocks on the list.
As one of the biggest car makers in the country, GM has enjoyed President Trump’s support through tax cuts and trade agreements with foreign nations. The standing treaties under Trump administration with Mexico, Canada and South Korea have benefited the US automobile industry, and thereby GM significantly.
Earlier this year, GM signed a memorandum of understanding with Honda to establish a strategic alliance in North America to share common vehicle platforms as well as collaborate on technological advancements.
GM delivered over 771,400 vehicles in China in the third quarter that ended September 2020, indicating a 12% rise year-over-year. Total industry SAAR is expected to increase 33.6% from the prior year quarter to an approximately 15.90 million vehicles.
With demand for private cars rising amid the rising number of coronavirus infected cases, analysts expect GM’s EPS to increase 2320% in the fourth quarter ending December 2020. Moreover, GM has an impressive earnings surprise history, as it beat the street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $36.10 billion for the next quarter indicates 17.1% improvement from the year-ago value.
GM’s impressive price performance has been a driving factor behind its popularity among millennial investors. The stock has gained more than 140% since hitting its 52-week low of $14.33 in March. It is currently trading just 11.7% below its 52-week high of $38.96.
GM is rated a “Buy” in our POWR Ratings system, with an “A” for Trade Grade and Peer Grade, and a “B” for Buy & Hold Grade and Industry Rank. In the 29-stock Auto & Vehicle Manufacturers industry, GM is currently ranked #3.
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WMT shares were trading at $140.22 per share on Thursday morning, up $0.18 (+0.13%). Year-to-date, WMT has gained 19.52%, versus a 3.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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