I think that anything that gets more people interested in investing is a good thing. Robinhood has done just that. The no-cost trading platform has attracted lots of new investors, especially younger individuals.
In some cases, the stocks that have been the most popular among Robinhood investors haven't necessarily been great long-term picks. My Motley Fool colleague Sean Williams even views several of these as stocks "to avoid like the plague" this year.
However, there are also quite a few popular stocks on Robinhood that have tremendous growth potential. Here are three such stocks that I think should make you richer in 2021.
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1. NVIDIA
Artificial intelligence (AI) has already become commonplace in our lives, but we're still at the beginning of the revolution. Plenty of AI stocks should be huge winners. One of the best in this group, in my view (and in Robinhood investors' minds, based on its popularity), is NVIDIA (NVDA 2.10%).
The list of customers using NVIDIA's graphics processing units (GPUs) to power AI applications reads like a who's who of industry leaders. With the performance advantage of its technology, I expect many more customers will flock to NVIDIA in 2021. The enormous demand for NVIDIA's A100 GPUs that are especially popular for use in data centers hosting AI apps will likely carry over into this year.
NVIDIA got its start in the gaming market. It's still a huge business for the company, generating nearly half of its total revenue last year. NVIDIA posted record gaming sales in the third quarter of 2020. Its new GeForce RTX 30 Series GPUs launch was tremendously successful, with the company stating that demand was "overwhelming." I expect that demand will continue to increase for NVIDIA's gaming business.
Look for progress on another important front for NVIDIA in 2021 as well that could serve as a catalyst for the stock: Its pending acquisition of ARM. The deal isn't likely to wrap up until early 2022, although several key milestones should be reached this year. NVIDIA maintains that the combination of its AI technology with ARM's CPU ecosystem will create "the premier computing company for the age of AI." That might sound like spin, but I suspect the company is right.
2. PayPal Holdings
PayPal Holdings (PYPL -1.93%) was a big winner last year, with its shares skyrocketing 116%. I like this Robinhood favorite's prospects of keeping the sizzling momentum going in 2021.
The COVID-19 pandemic is fueling a huge increase in online shopping. It's no surprise that PayPal recorded the strongest revenue and total payment volume growth in the company's history in its latest reported quarter. But will PayPal's sizzle fizzle once the pandemic is over? I don't think so.
PayPal expects to add around 70 million new active accounts this year. This should propel the company's revenue at least 21% higher. PayPal looks for adjusted earnings to jump close to 28%.
Don't think for a second that PayPal's growth is limited only to e-commerce. The company's Venmo peer-to-peer payment app continues to enjoy widespread popularity. PayPal is making Venmo even more attractive with new features like its recently introduced check-cashing capability. These kinds of innovations should increase PayPal's chances of rewarding investors handsomely yet again this year.
3. Pfizer
Pfizer (PFE -2.85%) ranked among the popular Robinhood stocks that didn't fare so well in 2020. The big drugmaker's shares dipped slightly while the overall stock market surged. I look for Pfizer to make investors much happier this year.
The big story for the company right now is its COVID-19 vaccine. Pfizer will soon begin to reap the rewards from its partnership with German biotech BioNTech in developing the vaccine. The two companies could split equally an estimated $14 billion or more in sales this year.
Some might worry that the long-term prospects for Pfizer's coronavirus vaccine won't be so great due in part to its ultracold storage requirements. However, Pfizer and BioNTech hope to unveil a new freeze-dried version of the vaccine later this year that eliminates those bothersome requirements. If that happens, it could provide a nice bump for Pfizer's shares.
Of course, Pfizer has plenty of other growth drivers as well. With the merger of the company's Upjohn unit with Mylan in November, Pfizer no longer has older products that have lost patent exclusivity weighing on its growth. The big pharma company expects to deliver average annual adjusted earnings growth of around 10% over the next few years. Throw in its juicy dividend, and Pfizer should provide market-beating total returns.
