3 Robinhood Favorites with Room to Run

Friday, January 29, 2021 | MarketBeat Staff
3 Robinhood Favorites with Room to Run

For better or worse, we've learned that there is power in number these days. Whether it be the storming of the U.S. Capitol or its stock market equivalent, a coordinated trading attack on hedge funds, gathering enough people for a cause can uproot the fundamental principles of society—and stocks.

But putting the soon to be punchline that is Gamestop aside, there are other companies out there that are popular with retail investors—but unlike many of the stocks embraced by the herd, are of high quality. Here we look a few of the most popular stocks among Robinhood traders that have both good fundamentals and significant upside potential.

Will Netflix Stock Get to $600?

The emergence of Disney Plus, NBC's Peacock, and other streaming entertainment platforms was supposed to spell doom and gloom for Netflix (NASDAQ:NFLX). However, at least so far, this has been far from the case.

The OG of subscription video services is looking as strong ever after surpassing its closely watched subscriber growth figure last quarter. It also hit 200 million subscribers globally as the pandemic has accelerated demand for in-home entertainment options.

A question mark around Netflix in recent years has been its ability to expand in overseas markets. But critics have chilled on this rhetoric given the company's recent execution internationally. Today, roughly half of Netflix revenue comes from outside the U.S.

Netflix shares have pulled back in relatively light volume after the huge volume surge on January 20th. This has buy opportunity written all over it. Given management's upbeat earnings guidance for the current quarter and plans to become free cash flow positive in the near future, traders should pounce on the recent pullback.

The stock trades at a premium to its peer group and deservedly so. Yet on a trailing P/E basis it is still below its historical average. Look for this multiple to expand and the stock price to reach the elusive $600 mark in the weeks ahead.

Will Square Stock Keep Going Up?

Speaking of great companies with awesome growth metrics, Square (NYSE:SQ) also has room to run. Pending the results of next month's earnings release, sales are on pace to have doubled in 2020.

What Square has missed out on in physical retail opportunities during COVID-19, it has more than made up for with a booming online business. More and more e-commerce customers are adopting Square's Online Store offering, Virtual Terminal, and other online seller solutions.

Meanwhile, thanks to the rising popularity of Bitcoin, the company's Cash App has been a major revenue driver. More than 10% of revenue comes from the Bitcoin trading app. Therefore, Square represents a way to gain some exposure to Bitcoin along with its core retail technology business.

Square is also trading at a very high multiple of its forward earnings, but analysts still say it can go higher. Earlier this month well regarded analysts at Mizuho Securities and Truist Financial both gave the stock 'buy' ratings and a $300 target. This makes intuitive sense considering the company has only scratched the surface in establishing an international presence with about 5% of sales derived outside the U.S.

The financial strength is also evident. Square's pristine balance sheet includes a $360 million cash balance that has nearly doubled since last quarter and a declining debt-to-capital ratio. Given the strong fundamentals and growth opportunities ahead, investors will want to take a swipe at Square.

What Makes Intel a Good Value Stock?

Intel (NASDAQ:INTC) has also made its way onto the list of most widely held Robinhood stocks. The company is a bit of a technology dinosaur by today's standards but is showing no signs of slowing down.

Last week a slew of analysts chimed in on Intel following the computer chipmaker's fourth quarter report. The reviews were mixed with a spattering of buy, hold, and sell ratings, but there's reason to believe the bulls may be right on this one.

Despite the competitive headwinds over the years, Intel still hangs onto the top market share in the global semiconductor space after recording almost $78 billion in sales last year. Last quarter Intel posted top and bottom-line numbers that handily beat the Street and point to continued strength in the quarters ahead.

While the data center business continues to disappoint, solid demand for PC's from the global ranks of remote workers drove robust sales of Intel's chips and other computer architecture. As a greater proportion of employees work from home over time, this demand isn't likely to fade.

In addition, Intel's Mobileye division remains an underappreciated growth engine. The Israel-based autonomous driving unit is on a mission to prove its technology is a safer alternative to human drivers and will be embraced by vehicle manufacturers. Mobileye's opportunities in the futuristic but seemingly arriving robotaxi space are particularly interesting.

Intel is also in the midst of a management transition which will define how the company performs in 2021. Next month VMWare CEO Pat Gelsinger will take over the reins. Some say his engineering background (which contrasts with current CEO Robert Swann's finance upbringing) may mark a pivotal moment in the company's ability to advance its technology prowess.

And let's not forget that Intel shares offer one of the best dividends in large cap tech. The 2.5% dividend yield and 11x P/E ratio make Intel one of the most under loved S&P 500 stocks. But given the recent gap up in heavy trading volume and backing from the herd at Robinhood, we are likely to see Intel trend higher as the year goes on.



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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Intel (INTC)2.2$64.70-1.1%2.15%12.69Hold$63.60
Netflix (NFLX)1.7$551.83-0.2%N/A89.00Buy$587.45
Square (SQ)1.3$273.98+3.3%N/A434.90Hold$223.27
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