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Will Ebiefung

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DraftKings and Beyond Meat offer rapid revenue growth.

Robinhood is one of the most popular investment apps for millennials because of its low fees and user-friendly platform. The company publishes a list of its 100 most popular stocks, and two of them seem set for a bull run.

The first pick is DraftKings (NASDAQ:DKNG), a bet on the fast-growing sports betting industry. The second is Beyond Meat (NASDAQ:BYND), a meat-substitute producer with the potential for real returns. Both stocks look ready to beat the market because of their rapid revenue growth and compelling business models.

1. DraftKings

The sports betting industry is expected to expand at a compound annual growth rate of 8.8% until 2024, but DraftKings is growing significantly faster. The mobile betting platform has seen its stock price soar 212% since the start of the year (through Friday’s close), while the S&P 500 just recently broke even.

Investors should keep in mind that the sports betting industry faces some near-term challenges if major sports seasons are canceled or further shortened by the coronavirus pandemic. But DraftKings is poised for continued long-term growth because of its expansion into nontraditional wagers like esports and virtual leagues.

It reported first-quarter earnings on May 15, and the results show that the platform can perform well in this tough economic environment. Total revenue grew 30% to $88.54 million, and the company launched new nontraditional content including esports built around NASCAR and the video games Counter-Strike and Rocket League.

While the full impact of the pandemic will likely be felt in the second quarter (whose results will be reported on Aug. 14), DraftKings looks set to hold up well because of these new betting options.

DraftKings is also making moves on the traditional side of the industry. This month, the company signed a multiyear agreement with the Professional Golfers’ Association Tour to become the organization’s first official betting operator. And it has a deal with Casino Queen in East St. Louis, Illinois, to rebrand the property as DraftKings at Casino Queen.

Both moves boost the profile of the brand and open the door for potential revenue opportunities in golf betting and physical casinos.

2. Beyond Meat

Beyond Meat is a disruptive food company known for the Beyond Burger, a plant-based patty that closely mimics the taste and texture of real beef. The stock has already soared 67% year to date and has plenty of room for continued growth because of its promising international expansion.

On July 15, Beyond Meat entered the Brazilian market with products to be sold at upscale supermarket chain St. Marche in Sao Paulo. This announcement follows an earlier Chinese debut through a restaurant deal with Starbucks in April and a partnership with Alibaba’s Freshippo grocery store chain in July.

International sales could potentially become a massive growth driver for Beyond Meat, especially in large vegetarian populations like India’s.

Beyond Meat reported first-quarter earnings on May 5, and the results show its international potential. Total revenue grew 141% to $97.1 million, while international sales grew 108% from $12 million to $25 million. Beyond Meat’s products are now available in 74 countries, and the company has opened a factory in the Netherlands, its first location outside the U.S.

Author: Will Ebiefung

Source: Fool: 2 Robinhood Stocks Poised for a Bull Run

Robinhood has introduced newer investors to some extremely risky stocks.

Robinhood has unlocked the magic of stock market investing for a new generation of investors with its low-cost and user-friendly investing app. But unfortunately, the platform has also introduced novice investors to low-quality companies with sketchy track records and poor financials. Some of these companies may even go bankrupt over the long term.

Here are three Robinhood stocks that might not exist five years from now:

Genius Brands International (NASDAQ:GNUS) is a struggling children’s entertainment company that generates massive losses because of its low revenue and spiraling expenses. Cruise ship operator Norwegian Cruise Line Holdings (NASDAQ:NCLH) is struggling to survive the coronavirus pandemic. And finally, AMC Entertainment Holdings (NYSE:AMC) is a movie theater company facing a secular decline in its industry.

1. Genius Brands: Hype with no substance

Genius Brands is a children’s entertainment company that caught the attention of Robinhood investors after it announced the launch of Kartoon Channel! a new kids education platform on Amazon Prime and other major streaming networks. The news sent the stock rocketing over 3,000% to a 52-week high of $11.73 in May before falling to as low as $1.66 at the time of writing.

Genius Brands followed its Kartoon Channel! announcement with several much-hyped business developments including a licensing deal with Arnold Schwarzenegger and a joint venture with Stan Lee’s Pow Entertainment to monetize the comic book legend’s unpublished intellectual property. But these new deals weren’t enough to sustain the penny stock’s massive valuation because management hasn’t established a track record of turning hype into tangible value for shareholders.

If these new shows don’t generate significant revenue, there is a real possibility that Genius Brands will go bankrupt within five years because of its stagnant revenue, low liquidity, and spiraling expenses.

The company reported earnings on May 18, and the results were a train wreck. Revenue fell 73% from $1.22 million to $0.33 million due to a collapse in television and home entertainment sales (even though the company’s much-hyped Rainbow Rangers show was renewed for a second season). The company’s operating loss also soared from $1.25 million to $1.77 million because of soaring general and administrative expenses.

Genius Brands only reports $2.76 million in cash and equivalents on its balance sheet and relies on equity dilution to fund its operations.

2. Norwegian Cruise Line: Low revenue and massive debt load

Norwegian Cruise Line may not exist five years from now — but don’t take my word for it. The company said as much in a May 5 SEC filing outlining “substantial doubt” about its ability to continue as a going concern because of coronavirus-related challenges in the economy.

With COVID-19 cases surging in the United States, health authorities have imposed a no-sail order preventing cruise ships from operating until Sept. 30. Unfortunately for Norwegian, this restriction has already been extended several times and may continue to be extended throughout the pandemic. To make matters worse, even when restrictions are lifted, international ports may be unwilling to allow ships originating from the U.S. to dock because of the high rate of infections in this country. All of this suggests the crisis could last deep into 2021.

Norwegian will struggle in this low-revenue environment because of its cash burn and heavy debt load. If the crisis continues on its current trajectory, the company may eventually find itself in bankruptcy court.

Norwegian stock has fallen around 75% year to date compared to the S&P 500’s 1.14% loss as it piles on a massive amount of high-interest debt to stay afloat in these rough waters. The company ended the first quarter with $8.43 billion in long-term debt compared to just $1.36 billion in cash — and its balance sheet has worsened in the second quarter. In May, the company closed an offering of $675 million in 12.25% secured notes followed by a July offering of $750 million in 10.25% secured notes and $400 million in exchangeable notes with a coupon rate of 5.375%.

As of March 1, Norwegian is in compliance with its debt obligations. But the new high-interest loans will put the company at greater risk of default if things don’t quickly return to normal.

3. AMC Entertainment: Secular industry decline and potential acquisition

AMC Entertainment is another Robinhood stock that might not be around five years from now. Shares have already fallen by 44% year-to-date because of coronavirus lockdowns and a secular decline in U.S. movie theater attendance. With the pandemic resurging, the company’s future looks increasingly grim.

AMC reported first-quarter earnings on June 9, and the results left much to be desired. Net losses expanded from $130.2 million to $2.18 billion because of a $1.85 billion non-cash impairment charge as the company wrote down the value of its theaters and business-reporting segments. AMC’s second quarter will be even worse because the chain is generating virtually no U.S. revenue with locations closed.

With such massive challenges, it’s no surprise that AMC reported “substantial doubt” about its ability to continue as a going concern in a June 3 filing with the SEC.

AMC plans to reopen some of its theaters starting July 30, and unlike the cruise industry, there isn’t a federal restriction preventing the company from doing so. But even reopening won’t solve AMC’s biggest problem: A growing number of films are delaying their release dates or skipping theaters altogether in favor of video-on-demand (streaming) releases — a trend that poses an existential threat for the company, even after the pandemic subsides.

The good news is that AMC’s story might not end in bankruptcy.

Some analysts at Bank of America believe the movie theater operator is a prime acquisition target for streaming companies like Amazon or Netflix which could offer theater access as a competitive advantage over their rivals. That means Robinhood investors could still make good on their AMC investment if a larger firm decides to buy out the company.

Author: Will Ebiefung

Source: Fool: 3 Robinhood Stocks That Might Not Exist in 5 Years

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