Buying a stock is deceptively easy, but purchasing the right stock at the right time without a proven strategy is incredibly hard. So what are the best Robinhood stocks to buy now or put on a watchlist?
At the moment, Facebook (FB), Snap (SNAP) and Square (SQ) are standout performers. Unlike GameStop (GME) and AMC Entertainment (AMC), which have been hitting the headlines of late, these stocks offer a mix of solid fundamental and technical performance.
Best Robinhood Stocks To Buy: The Crucial Ingredients
There are thousands of stocks trading on the NYSE and Nasdaq. But to generate big gains you have to find the very best. The best Robinhood stocks for investors will be those that offer a mix of earnings and stock market performance.
The CAN SLIM system offers clear guidelines on what you should be looking for. Invest in stocks with recent quarterly and annual earnings growth of at least 25%. Look for companies that have new, game-changing products and services. Also consider not-yet-profitable companies, often recent IPOs, that are generating tremendous revenue growth.
The Market Is Key When Buying Robinhood Stocks
A key part of the CAN SLIM formula is the M, which stands for market. Most stocks, even the very best, follow the market direction. Invest when the stock market is in a confirmed uptrend and move to cash when the stock market goes into a correction.
The stock market has suffered a few pullbacks amid inflation fears and concerns about the rise of the delta variant of the coronavirus weighing on the market. But the market is once again back to bullish ways, bolstered by an encouraging earnings season so far.
The broad S&P 500 and the tech-heavy Nasdaq finished last week with a flourish, closing at record highs. The Dow Jones Industrial Average also performed well, climbing nearly 1% for the week and finishing clear of the key 50-day moving average.
The market is back in a confirmed uptrend. Nevertheless, it is important that investors stay disciplined and stick to sound buy and sell rules, especially as the market has rallied back toward extended levels.
Now is a good time to be buy fundamentally strong stocks that have built sound chart patterns. The stocks featured below are potential candidates.
But remember, things can quickly change when it comes to the stock market. Make sure you keep a close eye on the market trend page here.
Best Robinhood Stocks To Buy Or Watch
Now let’s look at Facebook stock, PayPal stock and Square stock in more detail. An important consideration is that these stocks are solid from a fundamental perspective, while institutional ownership is also strong. They are also part of the Robinhood Top 100 Stocks, the platform’s most popular stocks among traders.
FB stock is already actionable from a 10-week line rebound and from clearing short-term resistance.
Shares failed to follow through on a post-earnings boost in late July, which is reflected in the fact its relative strength line has been moving sideways of late. Volume has also been quiet during the consolidation.
Strong market action and earnings performance have earned Facebook stock a best possible IBD Composite Rating of 99.
The growth rate in profits has accelerated in each of the past three quarters. In addition, an 82 Relative Strength Rating means Facebook resides within the top 18% of stocks in terms of stock market performance over the past 12 months.
Its EPS Rating of 96 is very strong, with earnings growing by an average of 82% over the past three quarters. This is well in excess of the 25% growth sought by the CAN SLIM cognoscenti over this time period.
Earnings are seen continuing to grow. Analysts expect full year EPS to pop 44% in 2021, before moderating to 14% growth in 2022.
Notable holders include the Fidelity Contrafund (FCNTX) and the MFS Growth Fund Class A (MFEGX). These are rated among the best funds by IBD research.
The firm has long been a leader in the field of social media, and earlier this year its market cap surged past the $1 trillion mark. Its platforms include the likes of Facebook, Instagram, Messenger and WhatsApp.
Ad revenue drives the business and Facebook advertisers are using the service to connect with prospective customers like never before, growing to more than 10 million businesses from more than 8 million when the pandemic started.
UBS analyst John Hodulik is rating Facebook stock as a buy with a 416 target. He said the firm’s long record of execution has earned the stock a “long leash.”
“Net-net, we continue to see FB’s ability to drive strong top line growth supported by their broader social commerce initiative and their opportunity to monetize under-monetized surfaces (Instagram Reels, Explore & Marketplace),” he said in a July 28 research note.
The stock aggressively gapped above a long consolidation buy point of 73.69 on Monday, and is currently trading just below this entry. Investors might want to see Snap stock break a short trend line, using Thursday’s intraday high of 74.95 a better entry point.
Meanwhile, Snap also has a flat base with a 79.28 entry. This won’t show up on MarketSmith pattern recognition, due to the Aug. 10 pop to 80.85, but Snap stock reversed lower that day.
While Snap stock slid back last week, it rose on Friday, finishing above its 21-day exponential moving average.
Snap stock has traded around the buy zone since a big post-earnings gap up, reaching a high of 80.85 on Aug. 10.
The relative strength line has been taking a breather after a sharp post-earnings spike. Investors will want to see it build momentum here.
Snap has a strong Composite Rating of 92. At the moment stock market performance is far more impressive than earnings, with the firm yet to turn an annual profit. Since the start of the year, SNAP stock is up more than 46%.
Institutional support is solid for Snap stock. It boasts eight consecutive quarters of increasing fund ownership, and an Accumulation/Distribution Rating of C. In total, 50% of stock is held by funds.
When the firm posted results July 23 it reported adjusted earnings of 10 cents on revenue of $982 million. Analysts expected Snap to report a loss of 1 cent on revenue of $845 million. Revenue jumped 116% from the year-ago period.
Daily active users jumped 23%, or 55 million, to 293 million, above estimates of 290 million.
“Snap delivered very strong second-quarter results and provided an excellent third-quarter outlook,” Monness Crespi Hardt analyst Brian White said in a research note. “The results demonstrate that Snap has dramatically improved its operational execution over the past couple of years, successfully leveraged new innovations, and enhanced its ad tech stack to capitalize on a greatly improved digital ad-spending environment.”
The social media firm claims it is the best way to reach millennials and teenagers. Big consumer brands have increasingly spent more of their digital advertising dollars on Snap’s platform.
In mid-May, Snap introduced its first augmented-reality smart glasses called Spectacles. The company previously released camera-embedded sunglasses under the same name.
“Snap has continued to differentiate with unique content and innovative experiences for users,” Third Bridge Group analyst Scott Kessler told IBD. “Our experts say Snap has done the best job in terms of social media AR/VR features and functionality, even though Facebook bought Oculus, a leader in this area, some seven years ago.”
The new Spectacles aren’t for consumers yet. The company is making them available to software developers to see what sorts of applications they can create with them.
PayPal rival Square finished the week strong, closing in the buy zone above a handle entry of 267.57. Shares rebounded on Aug. 20 from the 10-week line, offering aggressive entries.
Investors looking for SQ stock to show a touch more strength could wait for a break of a short trend line from the Aug. 5 peak, somewhere around 273.
Finally, investors also could use 289.33, just above the Aug. 5 all-time high, as a high handle entry. But trying to find early entries has been important over the past several months.
Shares surged 11% in the week ended Aug. 6, hitting a record 289.23 a couple days later. It surged after Square announced a $29 billion deal to pay AfterPay, an Australian-based “buy now, pay later” fintech. Square also reported blowout earnings, though revenue fell short.
The relative strength line has generally been making progress of late after a short pullback from mid-April until late May. Investors will want to see the stock follow through on this promise.
The stock currently holds a very impressive Composite Rating of 98, with earnings performance currently its strongest feature. It has managed to post a gain of nearly 24% so far this year.
Institutional support has been solid of late, with the stock boasting an Accumulation/Distribution Rating of B. Its Sponsorship Rating of A is also impressive.
The recent IBD 50 Stocks To Watch pick posted a Q1 sales increase of 266% to $5.05 billion. Meanwhile, EPS jumped from a loss of 2 cents a share to a 41-cent profit per share.
Square saw a significant revenue increase from its subscription and services-based products. For this segment, revenue was $558 million in the first quarter, up 88%. The company’s popular Cash App delivered strong growth in the first quarter, generating $4.04 billion of revenue, an increase of 666%.
Square stock experienced major growth in 2020 as investors focused on the growth of its consumer Cash App. But the digital payment processor warned that the app expects slower growth as government stimulus payments to consumers wind down.
For Q1, Square disclosed a new $170 million investment in Bitcoin on top of its $50 million purchase in October. Square reports Bitcoin holdings as unrealized gains on investments, excluded from adjusted earnings.
In a tweet on July 15, Square CEO Dorsey said the company will create a new business line to help developers build financial services products focused on Bitcoin. Square is “building an open developer platform with the sole goal of making it easy to create noncustodial, permissionless, and decentralized financial services,” Dorsey tweeted.
Square is a member of the IBD Sector Leaders, IBD’s most stringent and powerful screen.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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