Consensus has value. For example, restaurants with five-star ratings on Yelp tend to serve better food than those with only one star. The same concept can hold true in the stock market. The financial services company Robinhood publishes a running list of the 100 most popularly held stocks among users of its stock-trading app. It also provides information on each stock in the list, including data about the percentage of analysts that rate each stock as a good buy.
Here are two highly rated (at least among analysts) Robinhood stocks that look poised to beat the market.
The first pick is Moderna (MRNA +2.18%), a biotech company at the forefront of COVID-19 vaccine development. The second pick is Peloton (PTON 1.16%), a luxury fitness brand with a unique business model. Both stocks boast Robinhood analyst buy ratings over 90%. Let's find out a bit more about these companies and why analysts love them.
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1. Moderna
Moderna is a clinical-stage biotechnology company that specializes in developing messenger RNA (mRNA) therapeutics and vaccines. According to the University of Cambridge, RNA vaccines work by introducing genetic material coded to fight specific antigens, making them safer and faster to produce than traditional vaccines.
Moderna is a front-runner in the race for a coronavirus vaccine because of its experience working with this cutting-edge biotechnology innovation.
Moderna's COVID-19 vaccine candidate, mRNA-1273, is one of 23 potential vaccines in clinical testing. So far, the results are encouraging. The results of a phase 1, open-label trial (published in The New England Journal of Medicine) show that Moderna's drug was found to induce an anti-SARS-CoV-2 immune response in all participants with no trial-limiting safety concerns identified.
Moderna is listed on Robinhood's top 100 and has an analyst buy rating of 92%. Shares have soared a staggering 308% year to date compared with a 1% rally in the S&P 500 over the same period. The stock could rocket even higher if mRNA-1273 wins U.S. Food and Drug Administration approval to fight COVID-19.
2. Peloton
Peloton is another company ranked high on Robinhood's top 100 and 92% of analysts giving it a buy rating. The company specializes in luxury fitness, offering workout equipment along with a personalized subscription service. The stock has performed exceptionally well during the coronavirus pandemic with shares soaring 124% year to date on the back of strong stay-at-home workout demand.
Peloton is poised for continued growth because of the secular consumer shift toward home fitness experiences and the company's expansion into new workout equipment.
Peloton reported fiscal third-quarter earnings on May 6, and the results were a slam dunk. Total revenue grew 66% to $524.6 million. And this was driven, in part, by subscription revenue that soared 92% from $51.1 million to $98.2 million in the quarter. Peloton's subscription growth is a key metric for investors to watch because of its spectacular margins. The 92% increase in subscription revenue sent the segment's gross profit skyrocketing by 334% -- from $13.1 million to $56.8 million in the quarter.
Peloton's business model allows it to use its workout equipment sales to drive adoption of its higher-margin subscription service, making the company increasingly profitable as it grows. Peloton can double down on this innovative business model through new hardware releases. The company's CFO, Jill Woodworth, has hinted that a lower-priced treadmill and a Peloton rowing machine could soon be joining the hardware lineup.
The takeaway
Consensus can help you make more informed investment decisions and beat the market. Moderna and Peloton have both earned spectacular buy ratings on Robinhood, and that's a clue that these stocks could deliver superior returns over the long term.
