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In this article, we will take a look at 12 of the cheapest stocks on Robinhood. If you want to see more of the cheapest stocks on Robinhood, go directly to 5 Cheapest Stocks on Robinhood.
Robinhood is a trading app famous for offering free trades on stocks as a business model. Instead of making money from commissions, Robinhood makes money from interest, margin lending, payment for order flow and more.
As a result of saving people substantial amounts in commissions, Robinhood is one of the largest brokers in the world today with 12.2 million monthly active users and 22.9 million net funded accounts as of Q3 2022.
Recently, Robinhood stocks launched an index that featured 100 stocks that are popular with the company's userbase. Although some stocks in the popular 100 are meme stocks, some could be considered cheap in the long term given their competitive advantages and high quality businesses.
2022
2022 has been a challenging year in the market as the Federal Reserve has increased interest rates six times to fight inflation. Given inflation is still high, many analysts think the U.S. central bank could raise rates further.
If rates go up, aggregate demand could decrease and demand for individual companies could weaken in the near term. Although the market has already priced in some of the economic slowdown, there could still be downside if economic data doesn't meet expectations. Given the uncertainty in the market, it could be a good idea for long term investors to own a well diversified portfolio of stocks across many different sectors.
Methodology
For our list of 12 Cheapest Stocks on Robinhood, we took some of the most popular stocks in Robinhood that trade below the analyst average price target. To filter out meme stocks, we ensured that each stock had competitive advantages and scale.
Using the collective wisdom of hedge funds, we ranked the 12 based on the number of hedge funds in our database that held shares on the same stock at the end of Q2 2022.
12 Cheapest Stocks on Robinhood
12. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 51
The Boeing Company (NYSE:BA) shares have fallen substantially since the beginning of the pandemic given the decline in air travel. Although the company could face near term headwinds given macro headwinds, The Boeing Company (NYSE:BA) still has long term earnings growth potential given its scale and competitive advantages. Analysts have an average price target of $187.12 versus the price of $168.74 as of 11/9.
Alongside Visa Inc. (NYSE:V), Meta Platforms, Inc. (NASDAQ:META), and Microsoft Corporation (NASDAQ:MSFT), The Boeing Company (NYSE:BA) is one of the cheapest stocks that's popular on Robinhood.
11. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 55
Starbucks Corporation (NASDAQ:SBUX) has fallen 21.7% year to date due to the broader market weakness and macro headwinds. Nevertheless, some analysts such as David Palmer of Evercore ISI are bullish. Palmer has a $97 price target and an 'Outperform' rating on Starbucks Corporation (NASDAQ:SBUX) given his estimate of the company earning $3.39 in FY23 EPS. In the long term, Starbucks Corporation (NASDAQ:SBUX) has high quality earnings potential that could justify a potentially higher valuation.
10. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 70
Although Pfizer Inc. (NYSE:PFE) shares are down nearly 21% year to date, the company is a leader in R&D given its development of Paxlovid. With a substantial product pipeline, Pfizer Inc. (NYSE:PFE) has potential for EPS growth in the future even if Wall Street is expecting the company's earnings per share to decline by an average of 1.8% per year for the next 5 years. With a forward P/E of around 9, Pfizer Inc. (NYSE:PFE) could be a cheap stock in the long term.
9. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 72
Although NIKE, Inc. (NYSE:NKE) shares are down almost 45% year to date due to rising inventories and increasing costs, the company nevertheless has a very strong brand. If macroeconomic conditions normalize, NIKE, Inc. (NYSE:NKE) may be able to adjust with potentially more sales.
Leaven Partners commented on NIKE, Inc. (NYSE:NKE) in a Q3 2022 investor letter,
“Nike: NKE shares were a top detractor this quarter on higher inventory balances leading to lower-than-expected gross margins for the next couple of quarters. The company reported 1Q23 sales and EPS beats, but freight costs, markdowns, and the strong dollar weighed on gross margins. Nike continues to expect low double-digit currency-neutral sales growth, but the strong dollar will reduce overall sales growth and discounted inventory will further reduce gross margins for the year. Nike is, by far, the leading athletic footwear, apparel, and equipment company in the world with over $46 billion in revenue, $6 billion in 2021 annual free cash flow, and over $4 billion of excess cash. After working through its near-term currency and gross margin issues, we expect the company to return towards management’s guidance of at least 10% annual revenue growth, and return to its accelerating profit growth, as longer-term we expect margins to be materially aided by rising average sales prices (from both increased pricing and a mix shift to more premium products), the company’s deep innovation pipeline, a secular shift from the company’s traditional wholesale channels to a more direct-to-consumer approach (now 35% of revenues up from 16% ten years ago), and a more streamlined supply chain. We believe that the continued global secular growth trend towards active wear will continue to aid Nike’s top-line growth, while we expect the combined gross and operating margin improvements from its initiatives will drive long-term mid-teens or higher annual EPS growth for the foreseeable future.”
8. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
Given near term headwinds, NVIDIA Corporation (NASDAQ:NVDA) stock has fallen 53% year to date. According to Rajvindra Gill of Needham's analysis, there could be weaker than expected demand for semiconductor stocks in general in the trough part of the industry cycle. The broader market has also been weak. Nevertheless, NVIDIA Corporation (NASDAQ:NVDA) could still be a long term growth stock if it can achieve its potential. Analysts have an average price target of $190.5 per share for NVIDIA Corporation (NASDAQ:NVDA) .
7. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 99
Although a recession would be a headwind for Bank of America Corporation (NYSE:BAC) in the near term, Carleton English of Barron's believes Bank of America Corporation (NYSE:BAC) along with JPMorgan and Wells Fargo could handle one assuming that it's not severe. Bank of America Corporation (NYSE:BAC)'s balance sheet is stronger than it was several years ago and the bank has substantial long term earnings power. Analysts have an average price target of $41.1 per share for Bank of America Corporation (NYSE:BAC).
6. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 109
The Walt Disney Company (NYSE:DIS) shares fell 13.16% on Wednesday after the company missed on earnings and the company guided for slower than expected growth for next year. Nevertheless, some analysts are still bullish. Shortly after the earnings report, Philip Cusick of JPMorgan cut his price target to $135 from $145, but still retained an 'Overweight' rating on The Walt Disney Company (NYSE:DIS).
Like The Walt Disney Company (NYSE:DIS), Visa Inc. (NYSE:V), Meta Platforms, Inc. (NASDAQ:META), and Microsoft Corporation (NASDAQ:MSFT) are among the cheapest stocks that's popular on Robinhood.
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Disclosure: None. 12 Cheapest Stocks on Robinhood is originally published on Insider Monkey.
