Robinhood publishes a list of its top 100 most popular stocks. Some of them are questionable, money-losing investments -- but others are poised to deliver market-beating returns because of their strong business models and convincing near-term catalysts for growth.
Here are two top Robinhood stocks to consider adding to your portfolio in August.
The first pick is Disney (DIS -0.53%), a beaten-down entertainment giant poised to bounce with its streaming expansion. The second pick is Peloton (PTON 1.13%), a luxury fitness brand benefiting from the trend toward at-home fitness. Both stocks look poised for a bull run.
Image source: Getty Images.
1. Walt Disney
Disney is prepared to bounce back from the coronavirus pandemic. At $127 per share, the stock has recovered most of its March losses, but it is still significantly below its 52-week high of $153. At the same time, investors are getting more optimistic about Disney's exciting new streaming strategy.
The blue-chip entertainment company reported fiscal third-quarter earnings on Aug. 4. And as expected, the results were rough. The quarter, covering April to June, faced the brunt of lockdowns and travel restrictions during the height of the pandemic, which hurt Disney's sales and margins.
Total revenue fell by 42% year over year from $20.26 billion to $11.78 billion, driven by weakness in the park experience and products segment -- which fell 85% to $983 million in the quarter. With amusement parks having been closed for much of the year, it's little surprise that sales tanked. But investors can expect a recovery in the second half of the year because Disney has already reopened most of its locations.
Disney's direct-to-consumer (streaming) segment is also poised for strong growth over the long term.
The company has announced plans to launch a new streaming platform called Star in 2021 for the international market. The platform will include content from ABC, FX, and 20th Century Studios. Disney has also decided to launch the much-anticipated film Mulan on Disney+ and charge $30 to view it in the U.S. -- a move that highlights the company's potential edge in original content compared with rivals Netflix and Amazon.com's Prime.
2. Peloton
Peloton is a luxury fitness company that's hugely popular with Robinhood investors. The growth stock has performed well this year, with a 148% year-to-date rally powered by demand for stay-at-home exercise amid the coronavirus pandemic. The company is poised for continued growth because of its strong business model and improving margins.
With COVID-19 still at large, many consumers are avoiding gyms and instead opting to work out at home. That trend has been great news for Peloton, which saw equipment and subscription sales soar in the fiscal third quarter. The company's total revenue jumped 66% to $524.6 million because of strong equipment sales and a corresponding growth in subscriptions.
Peloton's business model is unique because equipment sales drive growth in the potentially much more profitable subscription service -- leading to rapidly improving margins.
The company's gross margin on subscription sales leapt from 26% to 58% in the quarter and looks poised to continue improving as the company's subscriber base grows. Peloton can drive future growth and margin improvements through new hardware releases. According to CFO Jill Woodworth, a lower-priced treadmill may be hitting shelves soon.
