10 Robinhood Stocks That May Not Be Great Investments

Trading app Robinhood has become increasingly popular with investors in recent years -- millennials, in particular -- with its commission-free and easy-to-use platform. The number of users on the app has swelled significantly since 2016. As of late 2019, Robinhood reported that it had over 10 million users on its platform, whereas it counted just 1 million users at the close of 2016. That number has likely grown exponentially in 2020.

With more than 5,000 stocks to choose from on the platform, Robinhood traders have a varied exposure to the lion’s share of the U.S. financial market. However, some of the most popular stocks with users on the app may not actually be the most sound investments.

These are 10 stocks that Robinhood investors may want to think twice about before buying.

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It’s no secret that the aviation industry has taken a significant beating in 2020. The world’s largest aerospace company, Boeing (NYSE: BA), is at the top of that list. The stock is down 50% year to date, with shares about 57% below their trading price just one year ago.

Boeing was already facing major headwinds before the pandemic. Last year, it reported a 24% year-over-year decline in revenue compared with 2018. In the quarter just ended, the company reported a 25% year-over-year loss compared with its revenue in the second quarter of 2019. The company’s first-half 2020 revenue was down 26% from its revenue during the same period in 2019.

In addition, Boeing’s woes from the tragic 737 MAX crashes in 2018 and 2019 continue to haunt the company. A congressional report released on Sept. 16 concluded that “Boeing made fundamentally faulty assumptions about critical technologies on the 737 MAX” and “withheld crucial information from the FAA, its customers, and 737 MAX pilots.” While Boeing may have been a good buy a few years ago, its growth and profitability over the next few is a big question mark. There are just too many risks attached to this stock to make it a good buy.

ALSO READ: Where Will Boeing Be in 5 Years?

Digital payments company Square (NYSE: SQ) has had its fair share of mountains to climb in 2020, and it doesn’t look like there’s an end close in sight. Even though the company posted double-digit revenue growth during both of the last quarters, its substantial net losses ($106 million in Q1 and $11 million in Q2) shouldn’t be overlooked. Looking back at Square’s financial performance last year, the company reported net losses of $391 million compared with its total net revenue of $1.3 billion.

Shares of the company are up by more than 127% year to date but are trading at an astonishing price-to-earnings ratio of 321. At the moment, this stock looks woefully overpriced and like one the risk-averse investor would do well to stay away from.

Coty (NYSE: COTY) has suffered from extreme and continued volatility this year. The beauty product company’s share price has slowly but steadily been declining for the past five years. Five years ago, you could purchase one share of the company for about $30. Now, shares are trading at less than $4 each.

Coty’s balance sheet has been effectively pummeled over the last few years. The company released its financial results for fiscal 2020 on Aug. 27, reporting a 22% decline in net revenue for the full year and operating losses of $1.2 billion. In fiscal 2019, the company’s revenue saw a decline of 8%. Even Coty’s dividend yield of 15.6% isn’t enough to make the company a compelling buy at the moment.

Shares of United Airlines Holdings (NASDAQ: UAL) are down about 57% year to date, which is no surprise given the vicious impact the COVID-19 pandemic has had on airlines around the world. The company dealt with hemorrhaging financial losses in the first and second quarters of 2020. It marked $1.7 billion in net losses with a 17% year-over-year decline in operating revenue in Q1, ended March 31. Its operating revenue was down 87% year over year in Q2, with $1.6 billion in net losses reported.

With federal bailout funds set to run out at the end of this month, the near-term financial future of companies like United Airlines remains uncertain. Stocks like this one still aren’t the best investment at the moment, or at the very least, should represent just one or two eggs in a varied basket of investments.

ALSO READ: Best Airline Stocks for 2020: Investing in Airlines

Bank stocks have faced plenty of challenges this year, and Wells Fargo (NYSE: WFC) is no exception. The company was one of a number of stocks that billionaires were selling in droves during the second quarter. Shares of Wells Fargo are trading at about 53% below the stock’s price at the beginning of the year.

The company’s Q1 2020 revenue was down 19% year over year, while its earnings in the second quarter represented a 26% decline from the same period in 2019. In the company’s Q2 report, management stated that it would be slashing its common stock dividend for the third quarter from $0.51 per share down to $0.10 per share. Also alarming are Wells Fargo’s staggering net losses, which totaled $331 million in the second quarter.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Shares of global cannabinoid company Cronos Group (NASDAQ: CRON) may be cheap at around $5, but that doesn’t mean the company is a good or profitable buy. Its continued financial losses are downright scary. In the first quarter of this year, Cronos reported operating losses of $45.1 million and an inventory writedown totaling $8 million, leaving it with a gross revenue margin of just 18%.

Things didn’t improve much in the second quarter of this year. While Cronos’ inventory writedown was reduced to $3.1 million, its $34.8 million in operating losses coupled with its gross losses of $3 million left it with a 1% profit margin.

Carnival (NYSE: CCL), like other cruise companies, is having a year of record losses all around. In the second fiscal quarter that ended on May 31, the company reported $4.4 billion in net losses on the basis of generally accepted accounting principles (GAAP), with its total revenue contracting to $0.7 billion, an 85% year-over-year decline.

The company announced on Sept. 16 that it would be selling Fantasy-class ships Carnival Fascination and Carnival Imagination. It had already sold Carnival Fantasy and Carnival Inspiration in July. On Sept. 17, management released a statement announcing that Carnival’s British subsidiary P&O Cruises was canceling all sailings through the first part of next year, with Caribbean cruises canceled until February.

ALSO READ: The Worst Mistake Carnival Stock Investors Can Make Right Now

Spaceflight company Virgin Galactic (NYSE: SPCE), a subsidiary of Virgin Group, has been hit hard by the pandemic. It reported net losses in the first and second quarters of $60 million and $63 million, respectively. Its Q1 revenue was just $238,000.

Virgin Galactic reported a cash position of $360 million at the close of the second quarter but absolutely zero revenue.

Providing an update on its test flight program, management stated the following, “Virgin Galactic expects to advance to the next phase of its test flight program with its first powered spaceflight from Spaceport America this fall, with two test pilots in the cockpit. Virgin Galactic then expects to conduct a second powered space flight from Spaceport America, with a crew of two test pilots in the cockpit and four mission specialists in the cabin. Assuming both flights demonstrate the expected results, Virgin Galactic anticipates Sir Richard Branson’s flight to occur in the first quarter of 2021.”

Although these developments may show promise, the company’s poor balance sheet is tough to overlook and investors may want to look elsewhere to invest their cash.

Investors rushed to buy shares of Eastman Kodak (NYSE: KODK) in July, following an announcement from the White House that the company would be manufacturing “essential medicines that have lapsed into chronic national shortage” under a $765 million loan agreement. The company’s share price promptly tumbled shortly afterward, when it was announced that the Securities and Exchange Commission had commenced an investigation into its award of stock options to management shortly before the loan was made public.

Although Kodak has since cleared itself of wrongdoing, it still looks like a pretty risky buy at the moment -- the company reported $94 million year-over-year revenue losses in the second quarter of this year with a GAAP net loss totaling $5 million.

ALSO READ: Are Robinhood Investors Right About These 2 Unstoppable Stocks?

Retail stores have certainly struggled this year due to widespread lockdowns and quarantines, so it’s no surprise that Gap (NYSE: GPS) has hit some major roadblocks to its profitability.

In the first fiscal quarter of 2020 ending on May 2, Gap reported net sales down 43% compared with the same period in the prior year. The company went from no short-term debt to $500 million in short-term debt in the first fiscal quarter, with its cash position down $600 million by the end of the quarter.

Gap’s balance sheet definitely improved in fiscal Q2 (ending Aug. 1), with its online sales up 95% and comparable sales up 13%. However, the company’s net sales were still down 18% year over year due to retail shutdowns. Its cash position ($2.2 billion) compared with its total long-term liabilities ($7.8 billion) is also concerning. Although the stock is now trading just short of its share price at the beginning of the year, it still looks too soon to label Gap a meaningful buy.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

You know the old saying: Well, “All that glitters is not gold” also applies to the stock market. These stocks may be popular with Robinhood investors, and some are trading at astoundingly cheap share prices, which can be a real temptation with how expensive stocks are in general right now. But I would argue that there are better buys to invest your hard-earned cash in during the month of September.

If you do decide to go ahead and invest in any of the stocks on this list, they should make up a small portion of your portfolio at best, at least until we see how these companies perform in the upcoming quarters.

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Square and Virgin Galactic Holdings Inc. The Motley Fool recommends Carnival and recommends the following options: short September 2020 $70 puts on Square. The Motley Fool has a disclosure policy.