November 30, 2021

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3 Small Caps Robinhood Traders Can’t Do Without

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This story originally appeared on MarketBeat

Popular mobile investing platform Robinhood is known for its lively features and boisterous fan base. Some of the biggest booms and busts that get touted on social media wind up in the Robinhood brokerage accounts.

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As the Millennial-friendly brokerage has gathered its loyal following it has also formed lists of its most widely traded stocks. The Robinhood 100, the best-known list, is a collection of the most popular companies on the platform.

Most of the names are familiar mega-caps like Microsoft, Apple, and Tesla. At the other end of the spectrum are about a dozen small cap favorites that Robinhooders are banking on to produce big gains. The majority are penny stocks, and the rest aren’t far behind.

Here are three of these high-risk stocks that just may be worth following the herd.

Is Sundial a Buy Ahead of This Week’s Earnings Report?

Sundial Growers (NASDAQ: SNDL) is currently the fourth most popular name in the Robinhood 100. It trails only Apple, Tesla, and meme stock AMC Entertainment. Why is there is such extreme interest in this sub-dollar cannabis play?

It’s hard to say, but Sundial Growers has somehow become the poster child for the marijuana legalization theme. The Canadian cannabis grower offers well-known brands like Top Leaf, Palmetto, and Grasslands that are produced at its three facilities in Alberta and British Columbia.

Although the share price has been cut in half since June, at $1.3 billion Sundial’s valuation still appears to be a stretch especially for a company that is still operating in the red. Analysts are expecting Sundial to breakeven next year, however, and potentially turn a profit in 2023.

Also on the positive side is Sundial’s lack of debt and $760 million cash balance. It could actually be a good time to harvest a position before the financial results improve and U.S. legislative momentum boosts demand for high-quality cannabis products.

One thing is for certain. The Robinhood buzz will pick up again on Thursday (Nov. 11th) afternoon when Sundial announces its third quarter results.

Is Go Pro Stock a Buy After Q3 Earnings?

Seven years removed from nearly touching $100, GoPro (NASDAQ: GPRO) stock is a popular and inexpensive bet on Robinhood at less than $10 per share. GoPro has flatlined for the last five-plus years, but patient traders are hoping a revival is in the cards.

GoPro offers a lineup of cameras and accessories designed for the active consumer. In its early days there was talk of its products becoming as mainstream as ipods and iPhones but they have been relegated to niche markets like surfing, skiing, and motorbiking. A series of marketing missteps and cost runups along the way made the company an afterthought in the world of consumer electronics.

Still, Robinhood traders continue to rally behind this underdog story. Some just think the products are cool, so the stock must do well. Others that have done a bit more due diligence see the potential for a major GoPro comeback. For this to occur, management will have to prove that it can build off the momentum gained during the pandemic.

Renewed interest in outdoor activities and finding new ways to connect with friends and followers created a surge in demand for GoPro products. Along with it, the company’s financials have improved and analysts forecast EPS of $0.73 in the current fiscal year.

Last week GoPro reported that subscribers were up 168% to 1.3 million in the third quarter driving a solid bottom line beat and a gap up in the stock. Quarters like these have amounted to head fakes in the past, but if demand stays strong as supply chain issues subside, GoPro shareholders may finally get the ride they’ve been waiting for.

Why Do Robinhood Traders Like Naked Brand Stock?

Naked Brand Group (NASDAQ: NAKD) is another speculative small-cap that Robinhooders can’t stop talking about. Despite enduring a pair of big reverse splits over the years including a 1-for-100 split in December 2019, traders believe the intimate apparel manufacturer can not only survive on the Nasdaq but someday thrive in the financial department as well.

In reality, Naked Brand’s following is as much to do about the scantily clad models that adorn its investor relations website. This has made it a virtual joke among 20- and 30-somethings that trade the stock on any news, legitimate or otherwise. Back in January it became one of the most successful meme trades and Robinhooders have been hanging around since for an after-party.

The latest twist in the Naked Brands saga unfolded on Tuesday (Nov. 9th) when it was reported that the company will acquire Cenntro Automotive Group, an electric vehicle technology outfit. The announcement follows the CEO’s earlier statement about a “disruptive” buyout opportunity possibly being in the works.

Obviously, the synergies are limited here unless Naked’s swimwear models promote the EVs. It appears to be simply a way for Cenntro to go public—and a publicity stunt to keep Naked Brand shareholders interested.

It remains to be seen how this acquisition plays out. Cenntro expects to bring in $25.3 million in sales this year and top $2 billion in sales by 2023. It may sound interesting, but its still better to buy Naked Brands only for the herd power (and entertainment value) rather than the financial outlook.

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