The buzz around Robinhood Markets (HOOD 4.44%) may have worn off since the pandemic passed, but the disruptive app-based brokerage still wields a lot of influence on the stock market. It made commission-free trades the norm in the industry, democratizing trading, and heralding a new era in the brokerage industry.
The company is a favorite among millennials with the average age of account holders estimated to be 31. Robinhood also shares with its users the top 100 most held stocks on the platform, which can offer a good starting point for investors looking for ideas.
So I found a few top-notch businesses on the top-100 list. Keep reading to see three top Robinhood stocks to buy now.
Image source: Getty Images.
1. Airbnb
Much like Robinhood has disrupted the brokerage industry, Airbnb (ABNB 0.75%) has done the same in the travel industry, making home-sharing mainstream and becoming the clear leader in the industry along the way.
The company benefits from several competitive advantages, including network effects, a well-known brand that allows it to save money on advertising, and a marketplace-based business model where its hosts do the hard work for them.
After laying off staff and cutting costs during the pandemic, the company has emerged as a profit machine. Over the last four quarters, Airbnb has generated a free cash flow margin of more than 40% as it's capitalized on the travel recovery and earns interest on the funds it holds between guest bookings and stays, an additional benefit from its business model. Over the long term, its margins seem likely to expand as the company benefits from an asset-light business model where incremental demand should flow through to the bottom line.
While Airbnb expects its revenue growth rate to moderate this year following the post-pandemic boom last year, the company has big plans to grow its business beyond just home-sharing, and it's penetrating a massive market in the travel industry. That should set it up well to be a long-term winner on the stock market.
2. Carnival
Staying in the travel industry, Carnival (CCL -0.66%) is another stock that looks poised for outperformance.
Shares of the world's largest cruise line have more than doubled this year as the company has posted record deposits and bookings as it recovers from the depths of the pandemic. Demand for cruises continues to be strong, meaning Carnival should continue to post record results through 2023 as bookings tend to come several months ahead of time, with the third quarter being its seasonal peak.
Looking ahead, management also gave new long-term guidance, calling for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) per available passenger berth day (ALBD/APBD) to increase by 50% by 2026, reaching its highest level in almost two decades. The company also aims to double its return on invested capital (ROIC) to 12% by then.
Carnival still faces a heavy debt burden and it diluted shareholders significantly during the pandemic. Still, its free cash flow is positive at $625 million in the second quarter, and demand is strong. That should pave the way for the business to return to full health, and improving financials will support further stock growth.
3. PayPal
Shares of PayPal (PYPL 2.90%) have lagged the market this year as the company slashed its guidance for margin expansion in its first-quarter earnings report.
Meanwhile, the stock is still down substantially from its peak in 2021 as concerns have mounted about competition from Apple, slowing growth, and a lack of a succession plan once CEO Dan Schulman leaves at the end of the year.
Those are legitimate concerns, but they seem more than sufficiently priced into the stock as PayPal currently trades at a bargain price-to-earnings ratio of less than 15 based on forward estimates. The company should continue to grow and gain leverage as its business as a digital payments platform is highly scalable. Meanwhile, products like Braintree, a payment gateway service PayPal acquired in 2013, are gaining adoption and contributing more to the business.
As concerns about a global recession cool, the company should also benefit from an increase in consumer spending, and it is taking advantage of the discounted stock price with plans to repurchase $5 billion in stock this year.
Given its affordable valuation and the underlying strengths of the business, PayPal looks like a good bet to outperform the market from here.
