It's not a bad time to invest in the stock market. The market continues to rally nearly 10 months on from its abysmal crash last March, fueled by increased investor confidence following positive vaccine news and another round of stimulus checks from the government.
Assuming your bills and essentials are covered and you have a solid nest egg of cash set aside, you might be thinking about using your $600 stimulus check to pick out some new stocks. If that's the case, here are three hot stocks to consider scooping up with your stimulus money.
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1. Roku
Now that digital entertainment is the new normal, it's no surprise that companies like Roku (ROKU +3.12%) are growing at an exponential rate. Roku makes a wide variety of products to support streaming entertainment, including players, soundbars, and wireless speakers. The company also operates its own ad-based streaming platform called The Roku Channel. The platform features free content from channels including Fox News, Peacock TV, and premium content from streaming services like Starz, AMC+, HBO Max, and Cinemax. The Roku Channel is designed to be a one-stop-shop streaming platform, so even if a user purchases multiple premium content services, their subscriptions are lumped into one monthly bill.
It's no wonder that Roku's popularity has soared since the pandemic began, as more entertainment consumers are turning to digital viewing options than ever. Investors have taken note, and shares of Roku have spiked more than 215% over the trailing 12 months. During the first three quarters of 2020, Roku grew its total net revenues by 55%, 42%, and 73%, while its average revenue per user soared by 28%, 18%, and 20% compared to the year-ago periods. In the third quarter alone, Roku accumulated nearly 3 million active accounts, bringing its total subscriber count to just shy of 50 million.
Roku had an established track record of growth long before the pandemic began, so investors shouldn't worry that its balance sheet will retract once long-term lockdown orders are lifted. In 2017, 2018, and 2019, the company reported explosive revenue increases of 29%, 45%, and 52% year over year. Roku is also in a great position cash-wise, with more than $1 billion in cash and cash equivalents on its balance sheet and about $466 million in total current liabilities. And seeing as Roku doesn't pay a dividend, the company has plenty of liquidity to pay off its near-term debt.
Roku's business model is an ideal fit for the digitization of entertainment. Its devices are in high demand, and the company's content platform is a no-brainer choice for users who want to access all their favorite streaming options in one place, without having to flip channels or keep track of multiple subscriptions. The company's proven its recession resilience over the past year. More importantly, Roku has plenty of catalysts at play to boost its balance sheet and share price over the next five to 10 years, which makes the stock an invaluable pick for long-term investors.
2. Green Thumb Industries
Marijuana stocks may be poised for substantial gains over the next few years, particularly in light of proposed bills across a number of states that could legalize adult-use marijuana in 2021 (like New York, Connecticut, and Pennsylvania), as well as the prospect of federal decriminalization of cannabis under the incoming Biden-Harris administration. One stock that has already fared well despite mixed legalization and could soar to new heights if these legal reforms go into effect is Illinois-based Green Thumb Industries (GTBIF +0.30%). The marijuana consumer packaged goods company and retailer currently operates 50 stores and more than a dozen manufacturing facilities spread across the U.S. It also holds licenses for close to 100 retail stores to support the company's fast expansion of its national footprint.
Shares have gained about 210% over the past 12 months. The stock also managed to avoid the sharp nosedive that many fellow cannabis companies took when the market crashed last March. Green Thumb Industries kept its investors happy with substantial year-over-year revenue increases in each of the first three quarters of 2020 -- 268% in the first quarter, 168% in the second, and 131% in the third. Commenting on Green Thumb's third-quarter performance, CEO Ben Kovler said:
Momentum remains strong across the country and in our business. The national election saw a green wave sweep across the country with five states -- New Jersey, Montana, South Dakota, Arizona and Mississippi -- all legalizing their respective cannabis programs...There was resounding support for our mission to promote well-being through cannabis and we remain bullish on our strategic position and the long-term prospects of our business.
Triple-digit revenue increases aren't anything new for Green Thumb. In 2019, the company's revenues were up 246% compared to the previous year, and in 2018, its revenues grew by a mind-blowing 278%. Green Thumb Industries has displayed remarkable performance over this past tumultuous year. While other competitors were facing strained balance sheets when the coronavirus pandemic forced some cannabis retailers to shutter for prolonged periods, Green Thumb continued to open new stores, expand its revenue streams, and boost its liquidity. The company currently has $160 million in current assets, and only $300,000 in short-term financial obligations due in the coming year.
Green Thumb is ideally positioned to capitalize on growing legalization and the potential federal decriminalization of cannabis, but unlike some other pot stocks, it's already operating from a place of strength. If you want to latch onto the green wave, Green Thumb Industries is a premium pot stock to hang your hat on.
3. Airbnb
The travel industry has taken a beating over the past year, but the day will come when pre-pandemic trends start to reemerge. When that happens, you might wish you'd invested in Airbnb (ABNB +2.65%). The company made an explosive public debut last month at $68 a share, and has since gained about 20%. There's no doubt that the coronavirus pandemic has had a deleterious effect on Airbnb's balance sheet, but these immediate headwinds are to be expected given the fact that most international and much of domestic travel has come to a screeching halt.
The company's revenues declined 32% year over year in the January-September period of 2020, and guests booked 41% fewer nights and experiences during this window compared to the year-ago period. To give some context, Airbnb's nights and experiences booked in the pre-pandemic era had grown 35% in 2018 and 31% in 2019.
Airbnb also marked a 39% year-over-year decline in its gross booking value during the first nine months of 2020, a stark difference from the superior growth reported in this segment in both 2018 (40%) and 2019 (29%). On the flip side, Airbnb's revenues and gross booking value rose during the third quarter of 2020 compared to the prior quarter, potentially signaling the beginning of what is sure to be a prolonged recovery.
Airbnb currently has roughly $2 billion in total debt to whittle away at, but the good news is that liquidity isn't an issue for the company. As of the end of September, Airbnb had nearly $3 billion in cash and cash equivalents on its balance sheet and almost $2 billion in marketable securities.
Airbnb was a go-to for travelers before the pandemic, and has continued to be a mainstay even as travel trends have slowed. While Airbnb will likely continue to grapple with ongoing losses in the upcoming quarters, its early signs of recovery during the third quarter and robust cash position can help it to withstand the near-term pitfalls the broader travel industry is currently facing. And even taking Airbnb's mixed performance in 2020 into account, analysts still think it can grow its average annual earnings by triple digits over the next five years. Once travel starts to recover, Airbnb's share price could skyrocket. In any event, this stock is a quality pick for aggressive investors willing to bet on the company's upside potential.
