Please ensure Javascript is enabled for purposes of website accessibility

2 Top Robinhood Stocks Poised for a Bull Run

By Will Ebiefung - Feb 23, 2021 at 8:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These game-changing stocks could deliver market-beating returns over the long term.

The Robinhood investing platform is considered by some to be a heat map of what's popular among retail investors in the stock market. But for every potentially troublesome meme stock found on Robinhood's list of most widely held stocks among its users, there are also some potential wise investments, like DraftKings (DKNG -0.85%) and Nike (NKE 1.47%).

These companies boast innovative business models and catalysts for explosive long-term growth. Let's explore the reasons why these two popular Robinhood stocks could supercharge your investment portfolio. 

1. DraftKings 

If you are interested in fantasy sports and gambling, you are probably familiar with DraftKings. The company is one of the leading sports betting platforms in the U.S., and share prices for the company have soared nearly 30% just in 2021 compared to the S&P 500's return of just 3.2%. Part of the reason is that DraftKings' digital focus gives it an edge over brick-and-mortar casino rivals amid the coronavirus-driven slowdown in tourism. 

Las Vegas Strip at night.

Image source: Getty Images.

Analyst firm Bernstein expects the sports betting opportunity to be worth $30 billion by 2030 as large states like California, New York, and Florida move toward legalization. DraftKings faces competition from traditional casinos like MGM Resorts and Penn National Gaming, which are also hungry for a slice of this market. But so far, the company's online business model has been an advantage over its rivals. 

DraftKings' total revenue soared 98% year over year to $133 million in the third quarter as the resumption of live sports leagues boosted customer engagement. Competitors MGM Resorts and Penn National Gaming saw sales fall 53% and 23%, respectively, in their most recent quarterly periods because of lower foot traffic to their properties due to COVID-19 (as a digital casino, DraftKings doesn't face this problem). 

DraftKings management plans to keep the momentum going by partnering with sports media networks to drive brand awareness and user engagement. In the third quarter, the company initiated a partnership with AT&T's Turner Sports for exclusive rights to present sports betting content. This follows a similar deal with Disney's ESPN to provide fantasy sports content on the network. 

2. Nike 

Successful businesses turn challenges into opportunities, and Nike is a perfect example of this phenomenon. The sports apparel maker has rapidly recovered from the coronavirus pandemic by pivoting to a more direct-to-consumer business model. This strategy can help the company remain relevant in an increasingly digital economy. 

Second-quarter revenue rose 9% to $11.2 billion powered by breakneck growth in the distribution channels NIKE Direct (sales made at Nike and partner stores) and NIKE Digital, which expanded 32% and 84%, respectively. This trend is part of Nike's "consumer-direct offense," which involves building a closer relationship with customers by phasing out third-party wholesale distribution. 

Nike's strategy seems geared toward driving growth and maintaining control of its brand image more than saving money, but management has provided some color on how the transformation will impact profit margins. 

CFO Matthew Friend notes that digital sales earn a 10-percentage-point-higher gross margin compared to wholesale. And the company's decision to lay off 700 workers at its Oregon headquarters could also boost its bottom line in future periods. Nike boasts an optimistic forward price-to-earnings multiple of 37, which suggests investors expect healthy profit growth in the company's future. 

Investing in digitization 

The pandemic boosted digitization rates in the economy, and DraftKings and Nike stock allow savvy investors to bet on this trend. Both companies look poised to outperform because of their innovative, direct-to-consumer business models. 

 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

DraftKings Inc. Stock Quote
DraftKings Inc.
DKNG
$14.03 (-0.85%) $0.12
NIKE, Inc. Stock Quote
NIKE, Inc.
NKE
$108.00 (1.47%) $1.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/22/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.