Young traders have high hopes for these momentum stocks.
Trading app Robinhood experienced explosive growth in 2020, including the addition of 3 million new accounts in the first quarter alone. Robinhood users have often been criticized in the financial media for being naive and inexperienced. Robinhood has even said half of its new users have never invested before, and its average user age is only around 31. But several popular stocks among Robinhood users have been top market performers in the past year, and Robinhood stocks that gained momentum often took off like a rocket. Here are 10 momentum stocks that Robinhood's millennial users love heading into 2021.
FuelCell Energy (ticker: FCEL)
FuelCell Energy is a renewable energy company focused on fuel cell technology. Renewable energy has been a winning theme among Robinhood users in the past year, and many of the most popular renewable energy stocks are still running strong. FuelCell shares are up nearly 580% in the past year, including about a 560% gain in the past three months. Unlike the alternative energy newcomers on this list, FuelCell Energy has been around since 1969. Despite its huge stock gains, the company reported just $18.7 million in revenue and a $15.3 million net loss in the most recent quarter.
Electrameccanica Vehicles Corp. (SOLO)
Electric vehicle stocks Tesla (TSLA) and Nio (NIO) dominated the Wall Street headlines in 2020 and are top holdings among Robinhood users. However, in the past three months, Canadian EV stock Electrameccanica Vehicles has outperformed both, gaining more than 180%. Much of that rally came in November after the company reported better-than-expected third-quarter earnings and revenue. Millennial investors are clearly betting big on EVs, and they don't seem to be too concerned about stock valuations. Electrameccanica shares trade at around 487 times sales, a valuation that reflects extremely high expectations for the company's quirky, three-wheeled vehicles.
At first glance, Coty isn't the typical Robinhood stock. The struggling fragrance, cosmetics and skin care company reported a 24.9% revenue decline and $1.01 billion net loss in fiscal 2020, and the company isn't the type of disruptive tech company Robinhood investors tend to prefer. However, the stock has gained about 84% in the past three months on optimism the company's business has finally turned a corner. Coty's new CEO has implemented strict cost-cutting measures, and the company also recently sold 60% of its Wella hair care brand to help pay down its nearly $8 billion in debt.
Palantir Technologies (PLTR)
Data mining firm Palantir went public via a direct listing on Sept. 30 at a price of $10 per share and a valuation of roughly $22 billion. Three months later, the stock is trading at more than $25, and Robinhood users are along for the ride. In its first quarterly earnings report in November, Palantir reported some impressive numbers, including 51.8% revenue growth. However, Palantir also reported an $853.3 million net loss in the quarter, and its stock trades at about 40 times sales. Palantir is exactly the type of high-priced, high-growth momentum stock Robinhood users love.
Plug Power (PLUG)
Plug Power is an alternative energy company working on developing a green hydrogen network. Plug shares are up more than 1,000% in the past year, including about 200% in the past three months. Much of that momentum heading into 2021 came after Plug reported a record $126 million in gross billings in the third quarter, up 106% from a year ago. The company also guided for full-year 2020 gross billings of $328 million and 2021 billings of $450 million. Plug's growth numbers are undeniable, but the stock trades at a steep valuation of around 33 times sales.
Kosmos Energy (KOS)
Kosmos Energy is a surprising momentum stock pick from the Robinhood user base given it is the polar opposite of an alternative energy stock. Kosmos is an oil and gas exploration and production company with operations primarily in the U.S. and Ghana. Now that the coronavirus vaccine rollout is officially underway, oil and gas stocks have finally started gaining some momentum on Wall Street based on the expectation that an economic turnaround and rebound in travel demand will boost oil demand in 2021. Kosmos shares have rallied about 150% in the past three months.
Tesla's approximately 700% rally last year was the talk of the town on Wall Street in 2020, but Chinese EV competitor Nio's 1,110% gain outpaced even Tesla. In addition to spectacular sales growth in 2020, Nio also dramatically improved its balance sheet. In late 2019, Nio was desperate for funding. However, it was able to successfully raise funds several times in 2020, including a roughly $3 billion offering in December. Nio reported 146% revenue growth and 53% net income growth in the third quarter, and the stock gained more than 150% in the past three months.
Ideanomics is a tech company focused on commercial electric vehicle adoption and next-generation financial services technology. Ideanomics is one of the most volatile momentum stocks in the Robinhood top 100, and the stock experienced several huge swings in 2020. Ideanomics is up 126.4% in the past three months, partially due to news that the company invested an additional $1.3 million in electric tractor company Solectrac. Ideanomics now holds a 22% equity stake in Solectrac. Ideanomics generated just $10.6 million in revenue in the third quarter, but it has plenty of bullish momentum heading into 2021.
XPeng is a leading Chinese EV maker focused on the middle to high end of the market. XPeng shares have been red-hot since the company first went public in August, but the stock really gained momentum in November. XPeng reported 342% revenue growth in the third quarter and unveiled its new autonomous vehicle software at the Auto Guangzhou expo. XPeng then followed up by reporting 4,224 vehicle deliveries in November, up 342% from a year ago. Robinhood users have repeatedly demonstrated they are willing to pay a steep price for momentum growth stocks like XPeng.
Possibly the most unusual stock on this list is department store retailer Macy's. Macy's understandably had a rough go of it in 2020 considering malls and physical stores were completely shut down for a large portion of the year. Macy's reported a 22.9% drop in revenue in the third quarter in an extremely difficult environment. However, the stock has doubled in the past three months, and younger investors appear to be betting that a combination of momentum and value will make Macy's a top economic recovery play in 2021.
Momentum stocks favored by young traders:
-- FuelCell Energy (FCEL)
-- Electrameccanica Vehicles Corp. (SOLO)
-- Coty (COTY)
-- Palantir Technologies (PLTR)
-- Plug Power (PLUG)
-- Kosmos Energy (KOS)
-- Nio (NIO)
-- Ideanomics (IDEX)
-- XPeng (XPEV)
-- Macy's (M)