An entire generation of new investors have been dipping their toes into the the stock market for the first time in recent years. Unfortunately, millennial stock favorites Apple (AAPL), Tesla Motors (TSLA) and Walt Disney (DIS) have been dragging down these young investors’ returns.
Apple (AAPL)
Last year, T.D. Ameritrade released data on the top stock holdings of each generation of investors. Not surprisingly, the top holding for millennials was AAPL. In fact, Millennials on average owned nearly six times as much AAPL stock as any other stock!
How’s that working out? In the past year, AAPL stock is down 24% on fears that the iPhone market may be slowly reaching its saturation point. In fact, AAPL posted its first revenue drop in 13 years last quarter as iPhone sales fell 16%. AAPL is constantly branching out with new products and services, but the iPhone still single-handedly accounts for roughly two-thirds of the company’s total revenue.
With more than $200 billion in cash on the balance sheet, a P/E ratio of around 11 and a 2.3% dividend yield, AAPL stock looks relatively cheap. The bad news for millennials is that the market seems uncertain about the upcoming iPhone 7 cycle and unsure of the next major long-term catalyst for the stock.
Tesla (TSLA)
Not surprisingly, T.D. Ameritrade found that millennial investors are more heavily invested in TSLA than any other generation of investors. Millennials see the electric car maker leading the transition of the auto industry, and even the entire energy sector, away from fossil fuels.
Much like with AAPL, millennial investors who got in early enough with TSLA are sitting on huge gains. However, in the past year, TSLA stock is down 12% on concerns the company may be biting off more than it can chew with its aggressive expansion plans.
TSLA produced roughly 50,000 automobiles in 2015 but plans to crank out a staggering 500,000 by 2018. This aggressive expansion will involve major financial investment, and the company’s cash burn is a big concern for the market. Earlier this month, Bank of America analyst John Murphy reiterated the bank’s “Underperform” rating and $155 price target for TSLA, calling the company’s 500,000 production goal “optimistic at best.”
Walt Disney (DIS)
Millennials were the only generation in the T.D. Ameritrade study that had DIS as a top-10 holding. I’m sure most millennial investors have nostalgic feelings about their favorite Disney movies and/or theme parks.
However, Disney’s broadcasting and cable networks segments, including ESPN and ABC, accounted for roughly $4.4 billion in profit last year. No other DIS segment, including parks/resorts and Walt Disney Studios, was anywhere near as profitable.
In case you’ve been living under a rock, Netflix (NFLX) has ushered in an entire movement in the TV business known as “cord-cutting,” in which TV viewers are ditching traditional cable and satellite TV services and opting for cheaper streaming TV services.
Last quarter, DIS reported a 1.8% decline in its cable networks revenue and lower ad sales in its media business.
Unfortunately for millennial investors, the uncertainty ahead for DIS’s broadcasting and cable networks segments has driven the stock down more than 10% in the past year.
Disclosure: As of this writing, Wayne Duggan had no positions in any of the stocks mentioned.
