Robinhood's Top 100 list shows the most widely held equities on the platform. Of course, an array of meme stocks stand out, but if you're willing to dig a little deeper, there are a few diamonds in the rough.
For instance, Amazon (AMZN +0.53%) and Square (SQ 0.48%) made the cut, and both look like good long-term investments. In fact, during the first quarter, billionaire Larry Fink added shares of Amazon to BlackRock's holdings, and millionaire Cathie Wood bought shares of Square for ARK's portfolio.
Here's what you should know.
Image source: Getty Images.
1. Amazon
Consulting specialist Kantar recently named Amazon the most valuable brand in the world, and it's easy to see why. Amazon's global marketplace receives over 5 billion visits per month, and the company commands 40% of the U.S. e-commerce market. By comparison, second place Walmart controls just 7%, according to eMarketer.
How did that happen? From day one, Jeff Bezos built the business around customer satisfaction. Amazon has invested billions of dollars into its logistics and fulfillment services, making it possible to provide Prime members with free one- or two-day shipping on millions of items. In other words, its brand has become synonymous with convenience.
To add, Amazon also enjoys a leadership position in cloud computing. During the first quarter of 2021, Amazon Web Services (AWS) captured 32% of cloud infrastructure spend worldwide, while second place Microsoft took just 19%.
In this case, the company's edge comes from its first-mover status. AWS launched two years before Microsoft Azure, and Amazon has never given up that lead. According to the International Data Corporation, AWS still offers a wider portfolio of infrastructure services than any other cloud provider.
More recently, Amazon set its sights on digital advertising, entering a market that's long been dominated by Alphabet's Google and Facebook. Even so, the company has gained ground quickly; it currently ranks fourth with 5% global market share, up from 2% in 2016, and eMarketer expects that figure to get bigger in the years ahead.
With three strong businesses, it's not hard to imagine why Larry Fink's BlackRock bought more Amazon stock. Despite a $1.8 trillion market cap, the future looks bright for this titan: E-commerce, cloud computing, and digital advertising are high-growth industries, and Amazon has established itself as a powerhouse in all of them.
Image source: Square.
2. Square
Traditionally, enterprises have relied on banks or independent sales organizations (ISOs) for merchant services, such as hardware, software, and payment processing. In this scenario, banks and ISOs typically bundle three different systems together, which can lead to compatibility and maintenance issues for clients.
By comparison, Square offers a single platform that integrates hardware, software, and payment processing services. It also provides solutions for inventory tracking, labor management, and customer loyalty, as well as software that helps sellers build an online storefront. In short, Square's end-to-end platform simplifies commerce.
But the company also offers financial tools for consumers. The Cash App was originally aimed at peer-to-peer payments, but it's since become a broad ecosystem of financial services. Today, this mobile wallet allows users to send, spend, and invest money -- it's even possible to file taxes with the Cash App.
Collectively, Square puts its market opportunity at $160 billion. And so far, the company's integrated approach to commerce has been a significant advantage, as evidenced by its rapid top-line growth.
|
Metric |
Q1 2018 (TTM) |
Q1 2021 (TTM) |
CAGR |
|---|---|---|---|
|
Gross profit |
$921.0 million |
$3.2 billion |
51% |
Data source: YCharts. TTM = trailing 12 months. CAGR = compound annual growth rate.
Square first gained traction with small- and medium-size businesses -- the clients that were overlooked by traditional merchant service providers. But more recently, it's made inroads with mid-market merchants (i.e., those with annual sales exceeding $500,000). In fact, gross purchase volume (GPV) from larger sellers surged 43% in the first quarter, growing more than twice as fast as total seller GPV.
Management believes it can maintain that momentum, citing the appeal of its premium point-of-sale (POS) software. These solutions go beyond the standard POS, offering more advanced features to retailers and restauranteurs.
Given that outlook, it's no surprise that Cathie Wood has bought this stock hand over fist. In fact, Square is currently ARK's third largest holding, with a price target of $375 by 2025.
