Many veteran investors tend to steer clear of the trading scene that younger and newer investors seem to embrace. They mostly feel that buying and holding stable stocks is the smarter, safer bet. Frequent trading simply makes it easier to lock in short-term losses that would have eventually been overcome with just a little patience. That's why so many of the app-based, zero-commission trading platforms like SoFi Technologies and Robinhood Markets (HOOD -2.60%) haven't attracted a great number of more experienced investors.
If you think these free trading apps are only drawing speculators to the riskiest of tickers though, think again. Three of the most popular holdings among Robinhood users right now are actually solid long-term picks. Let's take a closer look at these three Robinhood stocks.
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1. Snap
The company is called Snap (SNAP -2.79%), though you know its product as Snapchat. While the social networking and instant messaging platform has hardly upended more established alternatives like Meta Platform's Facebook or Twitter, the service boasted 306 million daily users as of the end of September. That figure was 23% better than Snapchat's headcount at the same point of 2020, marking the fourth straight quarter the service has produced year-over-year user growth of more than 20%.
As good as the company is at attracting new members, however, it's even better at refining its ad-supported product. Revenue is up 77% through the first three quarters of the year, and while Snap remains in the red, it's making great progress on that front. It's even expected to swing to a full-year operating profit of $0.36 per share for 2021 after losing $0.06 in 2021, en route to earnings of $0.57 per share in 2022. It all points to the ongoing improvements put in place that make Snapchat more engaging, like paying creators a collective sum of more than $250 million last year to produce and publish content that draws a digital crowd.
And yet, somehow, investors as a group aren't stoked about this stock. Shares are currently trading around $46 apiece, down nearly 40% from October's high and within sight of new 52-week lows. But, its weakness is rooted in short-term struggles related to changes in operating systems to offer users more privacy over advertising and to some recent missed earnings expectations. The analyst community that's looking further down the road feels the stock's actually worth about $73 per share.
2. NIO
Tesla may be the big name in the electric vehicle (EV) business. But it's not the only name. China's NIO (NIO -4.88%) is a contender too, delivering a record-breaking 25,034 EVs in the final quarter of 2021. For the full year, it shipped 91,429 battery-powered automobiles. Although that's less than a tenth of the 936,172 EVs Tesla shipped in 2021, NIO is also only about a tenth as old as Tesla. Given 2018's modest deliveries of 11,348 electric vehicles, the auto manufacturer is actually growing quite nicely.
Regardless, the entire EV industry has only scratched the surface of its future. The U.S. Energy Information Administration estimates the total number of EVs that will be on the world's roads will swell from less than 10 million now to 672 million by 2050. That's a massive amount of opportunity for Tesla, and NIO, and a bunch of other carmakers that plan on wading all the way into electric vehicle waters.
Investors don't see it, apparently. After an incredibly bullish 2020, NIO shares have been cut in half from last January's high. The global chip shortage hasn't helped, and may in fact be the biggest driver of all this profit-taking. Think bigger picture though, and longer-term. The semiconductor supply crunch will eventually end. The need for EVs won't.
3. DraftKings
Finally, add DraftKings (DKNG -2.79%) to your list of long-term prospects worth considering even though it's a favorite of what's mostly a short-term-minded crowd using Robinhood's commission-free trading app.
If you're only vaguely familiar, DraftKings is more than a mere fantasy sports platform. It's a full-blown sportsbook and even a more traditional betting venue that hosts games like blackjack and poker. There's nothing especially special about any of these businesses on their own. And making them available through mobile devices doesn't exactly make them more remarkable. What makes DraftKings the sort of service that attracts 2.1 million monthly users is the clever combination of all three sorts of entertainment.
See, while the sports gambling crowd may be a relatively small one, it's an incredibly involved one. Nielsen says more than half the fans of the United States' professional sports leagues are also interested in betting on those games. In a similar vein, market research outfit Technavio estimates the nation's sports betting industry will grow at an annualized clip of 10% through 2025 as more states continue to legalize the business, incrementally adding more than $100 billion worth of yearly business between now and then. The ongoing expansion of app-based gambling on sports will be the key driver of that growth.
To this end, analysts expect DraftKings to see year-over-year revenue growth of nearly 50% in 2022, suggesting the company is very well positioned to capture more than its fair share of the industry's growth.
