Robinhood is the favored trading platform of millennials, so it makes sense for investors to pay attention to the platform. With a mobile-first strategy and no commissions, the company has democratized trading, bringing in a new generation of investors, and forcing competing brokerages to follow it into commission-free trades.
Since Robinhood caters to the youngest generation of investors, with the average user just 31 years old, it's not a surprise that Robinhood investors tend to favor growth stocks , according to the list of the 100 most popular stocks among Robinhood traders. Keep reading to see three hot Robinhood stocks that could double this year.
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1. Zoom
Plenty of investors may have soured recently on Zoom Video Communications (ZM 1.46%), the company known for its now-ubiquitous videoconferencing platform. Zoom was an early darling of the pandemic as shares skyrocketed through much of 2020, but since the stock peaked last October at $588.84, it's fallen 47%. In other words, the stock would nearly double if it just recouped those losses.
Investor sentiment has changed since then, and many popular pandemic stocks have fallen out of fashion. However, many business executives believe the shift to remote work will be lasting, and that means there's still a huge opportunity for Zoom here. Offices will reopen, but the days of white-collar workers all commuting five days a week are probably over, which means that Zoom will continue to be a vital utility for business.
In its own guidance, Zoom forecast revenue growth of 42% this year to $3.76 billion to $3.78 billion, a robust clip even as it laps the breakneck expansion it experienced last year when revenue jumped 326%. It also sees adjusted earnings per share improving from $3.34 to a range of $3.59 to $3.65.
Management acknowledged that that guidance was conservative, as there's still a lot of uncertainty around the aftermath of the pandemic, and it also leaves out the potential for acquisitions and new products to drive further growth. Zoom is also giving away its product to 125,000 K-12 schools for free, which has affected its profitability, and that is set to stop on July 31. That could pave the way to another valuable revenue stream, or at least lower costs as the expense of supporting those free accounts is removed.
Remarkably, the stock looks undervalued according to some metrics. On a free cash flow (FCF) basis, it trades at 65 times earnings, and FCF should continue to increase as the company has shown it's a profit machine. If Zoom can outpace its guidance, the stock could ramp higher once again.
2. General Motors
Perhaps the easiest way for a stock to double these days is for it to tie its fortunes to the electric vehicle (EV) market, as a number of EV stocks have already doubled or jumped even further. General Motors (GM -0.05%) stock has caught some of this tailwind, as the stock has doubled over the last six months after GM made a number of announcements boosting investor hopes for its transition to electric and autonomous vehicles. Those include plans to launch 30 new global EVs by 2025 and investing more than $27 billion in EVs and autonomous vehicles by that year, exceeding its investment in traditional combustion vehicles.
Investors were also impressed by GM's Cruise AV division's teaming up with Microsoft on a long-term strategic partnership to commercialize electric vehicles. As part of that deal, Microsoft led a funding round of more than $2 billion in Cruise, valuing it at $30 billion.
Despite the stock's doubling, GM's market cap at $85 billion is just a fraction of that of Tesla, the leading EV maker, meaning it could still have plenty of room to run if investors buy into the EV transition. Additionally, the company's core business should benefit from strong sales this year. The pandemic has lifted demand for new and used vehicles and should continue to do so as Americans reorient their living situations to adjust to remote work and other changes.
The recent government stimulus package should also help support the company's business. For the current year, the company sees adjusted EPS of $4.50 to $5.25, meaning the stock is still cheap at a price-to-ratings ratio around 12.
3. Snap
Social media stocks like Snapchat parent Snap (SNAP 6.70%) have been on a tear over the last year as the pandemic has led to an acceleration in online communication and screen time, favoring apps like Snapchat.
This business has seen surging growth with revenue up 62% to $911 million in the fourth quarter, capping off a year with 46% revenue growth to $2.5 billion. It also posted an adjusted EBITDA profit of $166 million, showing the business is well on its way to getting into the black. New user features like Spotlight, which surfaces the most entertaining Snaps for users to see, improved ad products, and a loyal Gen Z user base have helped drive its recent growth as daily active users jumped 22% to 265 million last year.
Snap management wowed investors when it said at its Investor Day conference in February that it would grow revenue by 50% annually for the next several years, as investments in ad tools and futuristic user interfaces like augmented reality lenses begin to pay off. In fact, that forecast isn't even contingent on increasing its user base or engagement. Rather, it's a reflection of the fact that the company has just a 2% share of the digital ad market, even as its share of engagement is significantly higher.
While investors initially cheered that forecast, the stock has fallen by a third since then, even though there's been no reason for those expectations to change. That means the stock would gain 50% simply by retracing those losses, a good start toward doubling. Given the company's track record of innovation, its unique position in social media, and its popularity with Gen Z and millennials, the future looks bright for Snap.
