Have trading app Robinhood users pushed up the shares of Tesla Inc. (NASDAQ: TSLA) relentlessly day after day? The app has become so popular that users can create so much “buy” and “sell” volume in shares and options that it drives wild swings in some stock prices. Tesla, the price of which is up 429% this year, may be among these. Some other companies Robinhood traders find most attractive are very risky bets, much more so than Tesla. A hit to the financials of these companies or a piece of bad news could easily trigger an extreme sell-off, cratering the fortunes of many Robinhood traders.
Robinhood users recently have posted more monthly trades than industry leader Charles Schwab does. In June, its daily average trading volume was 4.3 million. Options trades by Robinhood users can amplify the effect it has on stock prices. For example, this kind of activity recently shot up the price of troubled Eastman Kodak Co. (NYSE: KODK) over 500% in two days.
Robinhood keeps a list of its users’ 100 most popular stocks. Each listing has the company’s price, price movement, market capitalization and analyst rating. Among them are stocks of public corporations in sectors badly crippled financially. Others have troubled track records and consistently post losses.
Among the truly risky stocks Robinhood traders find most attractive is that of cruise ship operator Carnival Corp. (NYSE: CCL), which can barely get its ships back out to sea because of the spread of COVID-19 on some cruises. Its stock has swung from a 52-week high of over $51 to a low of under $8. It trades an extraordinary 45 million shares a day. Carnival recently said it would continue to suspend operations until at least October 31. It sits on a mountain of debt. One more delay in when its ships can sail could send its stock into another nosedive the day it is announced.
Personal video camera company GoPro Inc. (NASDAQ: GPRO) sales have been pressured by the iPhone’s video function. That will not change. The video feature on the iPhone 12, which will launch later this year, is another upgrade. Analysts expect Apple Inc. (NASDAQ: AAPL) to sell tens of millions of these over the holidays. GoPro’s revenue collapsed in the second quarter, down 54% to $134 million. The tiny company lost $51 million. A look at the company’s cash position and debt shows how quickly it could fall into severe financial trouble.
Cannabis company Cronos Group Inc. (NASDAQ: CRON) barely has any revenue at all. In its most recently reported quarter, it was $9.9 million, up from an already unimpressive $7.7 million in the same quarter a year ago. Cronos restated 2019 financials, and regulators have started to question the action. The company’s stock price has dropped by half this year.
Catalyst Pharmaceuticals Inc. (NASDAQ: CPRX) is another Robinhood favorite that has almost no revenue at all. In the most recent quarter, the number was $29.6 million, up from $28.8 million in the same period the year before. The company has been in a losing struggle with the U.S. Food and Drug Administration (FDA) over the handling of one of its treatments. The expanded use of its only approved drug has been denied twice, which means it hardly has a product pipeline.
Corbus Pharmaceuticals Holdings Inc. (NASDAQ: CRBP) is another of Robinhood’s popular stocks. It has almost no revenue at all. In the second quarter, the figure was $286,000, on which it lost $38 million. Its treatments are in development stages and may not make it to market at all. Corbus only has $63 million of cash on its balance sheet.
Robinhood traders often have taken risks on companies that most investors would find completely unacceptable. Some of its most popular stocks are in public corporations that may not even survive. That spells trouble for investors, who could see their portfolios collapse, and collapse very suddenly.