Commission-free trading platform Robinhood is an excellent heatmap of where retail investors are putting their money. And while not every top Robinhood stock is a good investment, Virgin Galactic (NYSE:SPCE) and Snap (NYSE:SNAP) are worth a closer look. Let's explore the reasons why both companies would make great buys in November.
Virgin Galactic: to infinity and beyond?
Virgin Galactic is a mid-cap company that plans to generate revenue by sending tourists to space and developing a platform for point-to-point hypersonic air travel (a technology that involves flying passengers at high speeds and altitudes). The stock enjoys a near-term catalyst for growth as it comes closer to starting commercial operations.
Space travel is a potentially risky business, and the last thing Virgin Galactic needs is a high-profile disaster on one of its vessels. To mitigate this challenge, the company has developed a multistep verification and validation program with the Federal Aviation Administration (FAA) and has already completed 27 of the 29 elements required for clearance to fly paying customers. If everything goes as planned, the company expects to clear the remaining hurdles and send its founder, Sir Richard Branson, to space in the first quarter of 2021.
Branson's flight would pave the way for other paying customers, but Virgin Galactic did not provide a specific date to start commercial operations in its second-quarter earnings call.
The start of commercial operations could unlock massive value for Virgin Galactic investors. As of July 30, the company had already registered 600 potential space tourists representing around $80 million in early deposits. Success in the company's space tourism arm could also boost the prospects for its point-to-point travel business, which may use similar suborbital flight technology. Analysts at Morgan Stanley estimate the hypersonic market opportunity could be worth up to $800 billion by 2040.
Snap: massive international expansion
With coronavirus infections soaring across the world, now is a good time for investors to bet on digital entertainment. Snap is a social media platform focused on sending and receiving photos and videos. The stock is poised for massive growth as it expands internationally and increases its average revenue per customer (ARPU).
Three years after CEO Evan Spiegel allegedly claimed he wasn't interested in expanding to "poor countries" like India and Spain (the company has denied the allegations), Snap has developed a compelling strategy for attracting international customers. Its Rest of World daily active users (DAUs) -- excluding North America and Europe -- surged 43% to 87 million in the third quarter to represent 35% of total users.
India was a massive growth driver with DAUs up by 150% in the period, according to Nana Murugesan, Snap's managing director of international markets. But despite international growth, Snap depends on its U.S. business to power most of its revenue. U.S. average revenue per user (ARPU) soared 46% to $5.49 in the third quarter, compared to $1.43 in Europe and $0.95 in the rest of the world.
Snap can drive long-term growth by bringing its global ARPUs closer to its U.S. average. The company plans to boost engagement through its Snapchat Discover feature, which allows users to scroll through curated pop culture and news feeds. It is also investing in local content, language support, and marketing partnerships to tailor its content to users in international markets.
Two solid bets in an uncertain month
Both Virgin Galactic and Snap could make slam-dunk investments in November because their revenue drivers have low exposure to coronavirus-related headwinds in the economy. Virgin Galactic hasn't started commercial operations yet, and Snap could benefit from a boost in stay-at-home demand as nations in Europe reintroduce lockdown measures to slow the spread of the pandemic.