Robinhood Markets (HOOD 1.21%), the trading app that popularized commission-free stock trades for younger retail investors, served 17.3 million monthly active users during its latest quarter.
Robinhood's app is often associated with riskier meme stocks and cryptocurrencies, but investors using its platform are also buying plenty of evergreen stocks that can easily be held forever. Let's take a closer look at three top Robinhood stocks that fit that description: Apple (AAPL -0.10%), Amazon (AMZN 0.68%), and Microsoft (MSFT 0.31%).
Apple is a great long-term investment for three reasons. First, it boasts tremendous pricing power, because its users are fiercely loyal to its brand, which is often considered a status symbol in a market filled with cheap hardware devices. A recent study by Consumer Intelligence Research Partners (CIRP) found that 90% of iPhone buyers still plan to stick with Apple.
Second, Apple's ecosystem is incredibly sticky, because iOS and macOS only run on its own hardware. It's leveraging that stickiness to expand its ecosystem of paid services, which reached 785 million subscribers in the first quarter of 2022. The growth of its services segment will also gradually widen its moat against other tech giants and reduce its dependence on the iPhone.
Lastly, Apple is highly profitable and generates plenty of cash. It ended its latest quarter with $203 billion in cash and marketable securities, which gives it plenty of freedom to invest in next-gen technologies like augmented reality devices and connected cars. Analysts expect Apple's revenue and earnings to grow 8% and 10%, respectively, in fiscal 2022 even as it laps the strong launch of its first 5G iPhones last year.
Apple's stock isn't cheap at 28 times forward earnings, but it will likely remain a top safe-haven stock to own in this wobbly market.
Amazon's stock fell out of favor last year as investors fretted over the decelerating growth of its e-commerce business in a post-lockdown market. However, it's still a solid investment, for a trio of reasons.
First, Amazon actually generates most of its profits from its cloud platform, Amazon Web Services (AWS), instead of its retail marketplace. AWS is still the world's largest cloud infrastructure platform, and its growth enables Amazon to expand its lower-margin marketplace with discounts, cheap hardware devices, and various perks for Prime members.
Second, that virtuous cycle has enabled Prime to lock in more than 200 million subscribers worldwide, which increases the stickiness of its marketplace while widening its moat against other brick-and-mortar and online retailers.
Lastly, Amazon's ecosystem extends far beyond its commerce and cloud businesses. It also owns the third-largest digital advertising platform in the U.S., streaming video and music platforms (including Twitch), a video game publishing division, and Whole Foods Market. It's also gradually creeping into homes with a growing number of smart speakers, cameras, smart doorbells, fitness trackers, and Internet of Things (IoT) devices.
Analysts expect Amazon's revenue and earnings to grow 17% and 23%, respectively, in 2022 as its year-over-year comparisons to the pandemic gradually normalize. Its stock isn't cheap at 43 times forward earnings, but its aforementioned strengths could easily justify that slight premium.
Microsoft became a growth stock again in recent years as it aggressively expanded its cloud-based businesses -- which include Office 365, its Dynamics customer relationship management (CRM) services, and Azure, the world's second-largest cloud infrastructure platform after AWS. As a result, its total cloud revenue accounted for 43% of its top line last quarter.
Microsoft also reduced its dependence on on-premise software, temporarily offered Windows 10 as a free upgrade to reduce the fragmentation of its ecosystem, abandoned its costly Windows Phone efforts, and focused on creating more mobile apps for iOS and Android devices. It also continued to launch new Surface devices and Xbox consoles, and significantly expanded its gaming ecosystem with a series of bold acquisitions.
Those strategies, which were mostly executed by Satya Nadella after he became Microsoft's third CEO in early 2014, initially squeezed the tech giant's margins, but sparked a multi-year evolution into a "mobile first, cloud first" business, which thrilled Wall Street analysts again.
Those analysts expect Microsoft's momentum to continue with 18% revenue growth and 16% earnings growth in fiscal 2022, which ends this June. Its stock might seem a bit pricey at 33 times forward earnings, but Microsoft's consistent growth, the stickiness of its cloud ecosystem, and its resilience during previous economic downturns all support that higher valuation.