Robinhood has disrupted the broker market with commission-free trades, and grown its userbase to over 13 million customers since its start in 2015. Its growth has gotten even better during the pandemic, as volatility attracts a new generation of traders.
Their list of the 100 top stocks on their platform gives us a great look into the habits of its customers, which are believed to skew to the younger generation. Some of these popular stocks are clearly speculative plays. But three on this list are well considered solid investments. Let’s dive deeper and find out more about them and why they are great buys for February.
1. Visa
Visa is the second largest payment company after the Chinese UnionPay. Visa does not issue credit cards on its own — it just partners with companies that make Visa-branded cards, then they collect processing fees.
This business model protects Visa from the risks of unpaid bills, which are the responsibility of the issuing banks. Mastercard has this same business model, while American Express does do their own cards along with third-party issued cards.
Visa’s reach to over 200 countries make it synonymous with credit cards. It also benefits from the mobile payment explosion, since those apps must be linked to credit cards.
Visa’s annual revenue hit $21.8 billion in 2020, up from $13.9 billion in 2015. While its net income climbed to $10.9 billion from $6.3 billion. Analysts anticipate the company’s revenue and earnings to rise 7% and 8% in fiscal 2021 before continuing on to double-digit growth next year.
2. Amazon
Amazon is the world’s largest e-commerce company. Its business is based on a growth cycle among Prime, AWS and its online stores. Amazon subsidizes its marketplaces with AWS’ revenue.
That allows Amazon to continually sell its goods at low prices and grow its Prime ecosystem with bargain priced hardware and perks along with other loss-leading tactics. Amazon closed out 2019 with more than 150 million Prime customers worldwide, and that figure probably increased in 2020 thanks to the pandemic.
Amazon’s yearly revenue went from $107 billion in 2015 all the way to $280.5 billion in 2019. Analysts predict it to report revenue and earnings increases of 35% and 52% for 2020. Amazon’s stock increased over 400% in the previous five years, and its P/E of 70 looks reasonable given its amazing growth rates.
3. Microsoft
Microsoft was seen as a slow-grower before Satya Nadella took the reigns as its third CEO. Under Nadella, since 2014, Microsoft changed its software business into a cloud and mobile focused company, growing the Xbox and Surface divisions, and investing heavily into its cloud platform to compete with Amazon’s AWS.
The new CEO’s plans initially held back Microsoft’s earnings, but things have changed and the company is now a leader in the cloud segment. Annual revenue increased to $143 billion in 2020 from $93.6 billion in 2015, and its net income ballooned from $12.2 billion all the way to $44.3 billion.
More vitally though, its “commercial cloud” revenue went from around $8 billion in 2015 to the total figure of $50 billion in 2020. Analysts anticipate that growth to go on, with 14% sales expansion and 27% earnings expansion in 2021.
Microsoft skyrocketed almost 360% over these past five years, and it could look expensive at 30 times earnings. But the ongoing explosion of its cloud division, along with the post-pandemic uptick in its enterprise business, can easily justify such a small premium.
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