It's been a tumultuous year for the stock market, with the broad-based S&P 500 losing more than a third of its value in under five weeks, and gaining it all back in less than five months. Both the steepness of the bear market decline and the swiftness of the rebound are all-time records.
When volatility like this becomes the norm, it tends to draw short-term and/or novice traders. We know this because online investing app Robinhood, best known for offering commission-free trades and parceling out free shares of stock to new members, has seen its membership soar. The typical Robinhood user is only 31 years old, and the platform's leaderboard (i.e., its most-held stocks) is filled with penny stocks and other awful companies that typically attract only inexperienced investors.
But if you remove these penny stocks from the equation, you'll also realize that Robinhood investors absolutely love fast-growing stocks. Here are the four fastest-growing stocks (as measured by compound annual growth rate (CAGR)) currently among the 60 most-held securities on the platform. Note that I've excluded companies without substantive sales as of 2019, such as Nikola, Workhorse Group, and Inovio Pharmaceuticals, which would otherwise skew the results.
Moderna: 139.89% CAGR
The fastest-growing company that Robinhood investors can't get enough of is coronavirus disease 2019 (COVID-19) vaccine developer Moderna (MRNA -2.01%). According to Wall Street estimates, Moderna's sales are expected to surge from a mere $60.2 million in 2019 to $4.78 billion by 2024. For those you keeping score at home, that's a five-year CAGR of 139.89%. Of course, the vast majority of this jump is expected in 2021.
Moderna is one of a few companies leading the coronavirus vaccine race. Its vaccine candidate, mRNA-1273, showed no signs of severe adverse events among participants in phase 1 trials. Results also showed that people developed neutralizing antibodies after receiving a second dose of the vaccine. Moderna has now moved onto late-stage studies, with approximately 30,000 people expected to take part.
The company is also rolling in the dough. In May, Moderna raised about $1.3 billion from a share offering. It also received $955 million in funding from the federal government under Operation Warp Speed to expedite the development of a vaccine, and another $1.525 billion for 100 million doses of its vaccine.
But despite Moderna's 2020 success, don't discount how crowded the COVID-19 vaccine landscape could become over the next year.
Cronos Group: 104.82% CAGR
Probably not a huge shock here, but young people really like marijuana stocks -- the fastest-growing of which is Canadian licensed producer Cronos Group (CRON 2.47%). After generating $23.75 million Canadian in sales last year, Wall Street's consensus calls for CA$856 million in revenue by 2024. That's good enough for a five-year CAGR of 104.82%.
While I remain skeptical that Cronos Group can hit such lofty growth targets, its close ties with tobacco giant Altria Group (MO -0.34%) could be a major tailwind that helps the company grow. Altria invested $1.8 billion into Cronos in March 2019, giving it a 45% stake. Since Altria has decades of knowledge about marketing and developing smokable products, it's widely expected that it'll aid Cronos Group with the development and launch of cannabis vape products.
But therein lies the issue. Two Canadian provinces have banned vapes completely (Newfoundland and Labrador, as well as Quebec), while vaping health concerns that cropped up in the U.S. in 2019 have also constrained demand. Without a clear path to near-term profitability, Cronos looks like a stock that can be left on the shelf.
NIO: 60.66% CAGR
The younger generation is also infatuated with electric vehicles (EVs), and, more specifically, with Chinese EV manufacturer NIO (NIO 4.44%). After breaking out my calculator for some currency conversion, Wall Street is looking for NIO to grow sales from $1.12 billion in 2019 to an estimated $11.99 billion by 2024. That's a five-year CAGR of 60.66%.
There's no question that there's an absurd amount of hype built into the EV industry, and NIO is no exception. However, the company's second-quarter operating results do suggest that NIO may be able to make good on its valuation premium. After multiple quarters of lumpy deliveries, NIO recorded 10,331 deliveries of its premium ES6 and ES8 EV SUVs during the quarter. That almost tripled the number of deliveries from Q2 2019.
In August, NIO also announced the launch of a battery-as-a-service (BaaS) business model. In an effort to sell more EVs, NIO is going to reduce the initial cost of its vehicles and enroll buyers in a monthly subscription service responsible for replacing batteries and handling other upgrades. In other words, NIO is going to give up near-term operating margins, which Wall Street doesn't seem to care about, in favor of gaining long-term consumer trust and generating highly predictable residual cash flow.
Square: 52.88% CAGR (4-year)
It should come as no surprise that highflier payment facilitator Square (SQ 3.25%) makes this list of fast-growing stocks that young investors love. After producing $2.27 billion in revenue last year, Wall Street's consensus for 2023 comes in at a cool $12.4 billion. That works out to a four-year CAGR of 52.88%.
Part of Square's allure is its tried-and-true seller ecosystem. For years, Square has been providing point-of-sale and lending solutions to small businesses to aid their growth. Between 2012 and 2019, the gross payment volume crossing Square's network ballooned from $6.5 billion to $106.2 billion. With more businesses utilizing its seller ecosystem and bigger merchants starting to get involved, Square should see a steady uptick in merchant fees.
But the most intriguing growth driver is peer-to-peer payment platform Cash App. In just 2 1/2 years, the number of monthly active users (MAUs) has more than quadrupled to 30 million. What's more, roughly 7 million of these MAUs are also using Cash Card, which is a debit card that pulls from a user's Cash App account balance. Cash App gives Square a number of ways to generate money, including merchant fees, bitcoin exchange, and expedited transfer fees. It'll almost certainly be the company's key growth driver moving forward.