Trading app Robinhood publishes a list of its top 100 most popular stocks. Some of them are questionable investments that are too risky for the novice investors who make up much of Robinhood's clientele -- but others are poised to deliver market-beating returns because of their strong business models and convincing near-term catalysts for growth. Here are two top Robinhood stocks to consider adding to your portfolio in August.
The first is Walt Disney (DIS 0.85%), a beaten-down entertainment giant poised to bounce with its streaming expansion. The second is Peloton Interactive (PTON 13.00%), a luxury fitness brand benefiting from the trend toward at-home fitness. Both stocks look poised for a bull run.
Walt Disney: A new streaming strategy
Disney is prepared to bounce back from the coronavirus pandemic. As of Friday's close, the stock has recovered most of its losses since the market's high in February, but it's still significantly below its own 52-week high around $153. At the same time, investors are getting more excited about Disney's streaming strategy.
The blue-chip entertainment company reported earnings for the third quarter of its fiscal 2020 on Aug. 4. As expected, the results were rough. The quarter, covering April to June, faced the brunt of lockdowns and travel restrictions during the height of the pandemic, which hurt Disney's sales and margins. Total revenue fell by 42% year over year, driven by weakness in the park experience and products segment -- which fell 85% in the quarter. With amusement parks having been closed for much of the year, it's little surprise that sales tanked. But investors can expect a recovery in the second half of the year because Disney has already reopened most of its locations.
Disney's direct-to-consumer (streaming) segment is also poised for strong growth over the long term. The company has announced plans to launch a new streaming platform called Star in 2021 for the international market. The platform will include content from ABC, FX, and 20th Century Studios. Disney has also decided to launch the much-anticipated film Mulan on Disney+ and charge $30 to view it in the U.S. -- a move that highlights the company's potential edge in original content compared with rivals Netflix and Amazon's Prime.
Peloton Interactive: A super-scalable business model
Luxury fitness company Peloton has performed well this year, with a 140% year-to-date rally powered by demand for stay-at-home exercise amid the coronavirus pandemic. The company is poised for continued growth because of its strong business model and improving margins.
With COVID-19 still at large, many consumers are avoiding gyms and instead opting to work out at home. That trend has been great news for Peloton. Thanks to demand for its connected exercise bikes and treadmills, equipment and subscription sales soared in the fiscal third quarter. The company's total revenue jumped 66% to $524.6 million because of strong equipment sales and a corresponding growth in subscriptions.
Peloton's business model is unique because its equipment sales drive growth in the potentially much more profitable subscription service -- leading to rapidly improving margins.
The company's gross margin on subscription sales leapt from 26% to 58% in the quarter and looks poised to continue improving as the company's subscriber base grows. Peloton can drive future growth and margin improvements through new hardware releases. According to CFO Jill Woodworth, a lower-priced treadmill may be hitting shelves soon.