2 Robinhood Stocks With Market-Beating Potential

With its commission-free trading and simplified investment experience, Robinhood Markets emerged over the past several years as a game-changing investment platform for retail investors. One of the services Robinhood offers is a regularly updated list of the top 100 stock holdings of its millions of users. This list provides some insight into what stocks retail investors are buying the most in any given month.

While this list includes some stocks that are speculative trades in whatever meme is popular at the moment, many of the most popular stocks among Robinhood users are in quality companies with solid growth prospects. Meta Platforms (NASDAQ: META) and Apple (NASDAQ: AAPL) are popular stocks on the list that also have serious market-beating potential. These two tech giants are excellent cash-flow producers looking to capitalize on an industry that could be worth $13 trillion by 2030. Let's find out a bit more about these two market-beaters.

1. Meta Platforms

Meta Platforms is known for its popular social media platforms, including Facebook, Instagram, and WhatsApp. The company is the second-largest digital advertiser by revenue in the U.S., trailing only Alphabet's Google. In the first quarter, it had over 3.8 billion monthly active users across its family of apps.

In 2022 the company struggled due to rising expenses and slowing growth for its digital advertising efforts. Following its third-quarter earnings report release, the stock fell as low as $88 per share. Since that low point, CEO Mark Zuckerberg has worked on a turnaround of the company. He revealed Meta would be cutting expenses ruthlessly and focusing on high-conviction opportunities.

In November, the company announced 10,000 layoffs, kick-starting a shift toward a "year of efficiency." Earlier this year, the stock popped following its first-quarter 2023 earnings amid revenue growth, better-than-expected second-quarter earnings forecasts, and lower-than-expected expense estimates for the year.

Meta is well positioned in the digital advertising space, which is expected to grow from $521 billion in 2021 to $876 billion by 2026, according to eMarketer. However, what has me most excited is a business segment that is currently losing Meta billions of dollars per year: the metaverse.

A person looking through a virtual reality headset.

Image source: Getty Images.

Last year, its Reality Labs segment, which accounts for metaverse and virtual reality products, lost $13.7 billion. In the first quarter, this segment lost another $4 billion. While its pursuit of the metaverse seems like a money drain, the industry still has the potential to be explosive. According to one estimate by Citigroup, by 2030, the metaverse economy could be worth anywhere from $8 trillion to $13 trillion.

Getting there will require significant investments, which Meta is making today. Reality Labs is likely to remain a money-losing venture for Meta in the coming years. However, its dominant position in digital advertising and stellar cash flows positioned Meta well to deliver market-beating returns over the long haul, with its metaverse venture giving it further upside potential.

2. Apple

Apple stock is tops across several categories. It's the largest stock (by market cap) in the S&P 500 index, the largest holding in Berkshire Hathaway's portfolio of publicly traded companies, and the world's most valuable brand, according to Interbrand.

The company's product offerings include hardware like the MacBook, iPhone, and iPad. Last year, the iPhone grew its share of the U.S. smartphone active user market to 50%, overtaking Android for the top spot. It also sells accessories for those products, including its Airpods and Apple Watch. It also makes money from its services business, which includes iCloud, digital content, and payments, among other services.

Apple is a free-cash-flow behemoth, generating $97 billion last year. This is cash it can use to reinvest in the business, pay dividends, and buy back stock. Apple has spent substantial capital buying back stock over the past 10 years. Since 2013, it has spent $549 billion on buybacks, reducing its share count by 37% -- and it still has over $20 billion in cash on its balance sheet.

AAPL Free Cash Flow Chart

AAPL Free Cash Flow data by YCharts. TTM = trailing 12 months.

Analysts expect Apple to announce its virtual reality headset during its June Worldwide Developers Conference. According to a report by Bloomberg, the headset will run hundreds of thousands of apps, including its flagship Camera, FaceTime, and Messaging apps. Users will also reportedly be able to watch sports and use it for fitness workouts.

Apple's strong brand and stellar cash flows ensure it can continue innovating and rewarding its investors, making it another solid stock for the long haul.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Courtney Carlsen has positions in Apple. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Meta Platforms. The Motley Fool has a disclosure policy.