Stock market volatility has been off the charts for much of 2020, but that hasn’t fazed millennial investors one bit. We know this because millions of novice and millennial investors have signed up for a Robinhood account this year.
Online investing app Robinhood is well known for offering commission-free trades, gifting free shares of stock to new members, and allowing fractional share investing. But it’s also gained a reputation for its exceptionally young user base, which averages only 31 years in age. While it’s fantastic to see young people putting their money to work in the world’s greatest wealth creator, many of these users lack the tools or knowledge to successfully invest for their future. As a result, Robinhood’s leaderboard (the 100 most-held stocks on the platform) is littered with terrible stocks.
When I say “terrible,” you might think I’m exaggerating. But according to Wall Street’s consensus price targets, four of the 12 most-held stocks on Robinhood are expected to fall between 16% and 41%.
Tesla: Consensus 41% below current price
Electric-vehicle (EV) manufacturer Tesla (NASDAQ:TSLA) is the second-most-popular holding on Robinhood, and it’s galloped higher by well over 600% on a year-to-date basis. But based on Wall Street’s consensus price target of $375.66, this innovative auto stock could lose 41% of its value.
There’s no denying that Tesla has a lot going for it. The company looks to be on track to deliver north of 500,000 EVs in 2020, and announcements from its Battery Day event suggest that it’ll remain the industry leader in battery range and power for some time to come. In other words, Tesla’s first-mover advantage continues to strike a chord with car buyers and investors.
Yet, Tesla isn’t profitable on a recurring basis solely from selling EVs. The company has regularly relied on selling emission credits to pump up its sales in what’s historically been a highly capital-intensive, low-margin industry. While Wall Street is usually willing to overlook profitability for high-growth stocks, I’m not so sure that applies for a company sporting a $608 billion market cap.
Furthermore, all next-big-thing investment bubbles have eventually burst over the past quarter of a century. Whether it was the internet, business-to-business commerce, genomics, blockchain, or cannabis, these bubbles eventually popped when investors came to the conclusion that their expectations far exceeded reality. All industries need time to mature, and that includes EVs.
American Airlines: Consensus 36% below current price
Airline stocks have also been blazing hot of late, with American Airlines Group (
Read More: 4 Ultra-Popular Robinhood Stocks That Could Drop 16% to 41%, According to