As the saying goes: Demographics is destiny. If anything, this has been the case with baby boomers, which have had a huge impact on the stock market (in the 1980s and ’90s) and real estate.
But of course, it looks like millennials will also make a mark, especially with the megatrends of technology. This group — which includes those between 18 to 34 — accounts for 75.4 million people, which is actually more than the baby boomers (74.9 million).
According to a survey from Bank of America Corp (BAC), nearly 40% of millennials indicated that they spend more time with their smartphones than with parents, friends, children and co-workers! But there are other interesting stats:
- 40% prefer texting vs. other methods of conversing
- 58% have multiple mobile devices
- 68% are more likely to use mobile and online banking as a primary source
- Oh, and 91% use emojis
So given all this, what are the opportunities for investors?
In other words, what are the stocks to buy now? Well, let’s take a look at seven.
Millennial Stocks to Buy Now #1: PayPal Holdings Inc (PYPL)
The Bank of America survey also shows that 57% of millennials are likely to use their phones to make payments. So yes, this is very good news for Paypal Holdings Inc (PYPL).
The company’s platform has 184 million active customer accounts and processes 1.4 billion transactions per quarter, with total payment volume of $81 billion. The company also has a lucrative business model. In the latest quarter, operating cash flow came to $738 million versus revenues of $2.54 billion.
But PYPL is nicely positioned for millennials. After all, the company owns the Venmo app, which allows for social payments. In the first quarter, transaction volume hit $3.2 billion, up a sizzling 154% on a year-over-year basis.
The average Venmo user opens the app about two to three times per week. What’s more, there is heavy sharing with friends, which helps increase user growth. For example, in a typical month, there are more than two million sharings of emojis for beer mugs, wine glasses and so on.
Yet, the growth opportunity remains enormous. According to a recent PYPL investor presentation, the addressable global market is a whopping $90 trillion for online/mobile, offline retail and digital money.
Millennial Stocks to Buy Now #2: Facebook Inc (FB)
Granted, Facebook Inc (FB) may not necessarily be an obvious choice for stocks to buy for the millennial takeover. Let’s face it, there are other fast-growing apps, like Snapchat, that are gaining ground. Besides, FB is kind of old, having been founded in 2004.
Yet, Mark Zuckerberg (who, by the way, is the world’s richest millennial) has been adept at navigating the dynamic changes. A critical achievement has been his transition to mobile. This has been something that has eluded many other early-generation online operators, such as Zynga Inc (ZNGA).
But Zuckerberg has also leveraged his company’s large cash balance and market cap by pursuing smart acquisitions for companies like Instagram, WhatsApp and Oculus. The result is that FB has dominant positions in key growth markets, like videos/photos, messaging and virtual reality.
In the first quarter, FB reported mobile active users of 989 million, up 24% on a year-over-year basis, and 1.51 billion mobile monthly active users, up about 21%. The company, of course, has also been able to translate this into incredible financials. In Q1, revenues spiked by 52% to $5.38 billion and the net income came to $1.510 billion.
Yet, the growth rate may accelerate. How so? Just look at a recent massive research report from venture capitalist, Mary Meeker. Based on her analysis, mobile accounts for 25% of time spent with media. However, mobile advertising represents a mere 12% of the overall budget. According to Meeker, this gap will eventually close — and it seems like a pretty good bet that FB will get a big chunk of the revenue opportunity.
Millennial Stocks to Buy Now #3: Amazon.com, Inc (AMZN)
Like Facebook, Amazon.com, Inc. (AMZN) is benefiting from a variety of megatrends, such as e-commerce, tablets and media streaming. But even if the company falls short in its efforts, there is something else to consider: That is, the company operates one of the largest cloud businesses, which powers mobile apps and video!
Yes, it seems like — one way or another — AMZN will remain a winner.
But then again, the company continues to be customer focused, which means loads of innovation and experimentation. Perhaps one of the most promising areas, which is likely to benefit from the interest of millennials, is voice-operated personal assistants. According to venture capitalist Mary Meeker, about 50% of all web searches will be through voice and image searches (by 2020).
She also thinks Amazon.com’s Echo is one of the category leaders in this space. By using microphones as the input device within a home, a user can shop three times faster than traditional means. There is also the convenience of the Prime service as well as features like shopping lists and reordering.
So far, AMZN has sold four million Echos, with one million coming in the latest quarter. During the latest conference call, the company noted it is having trouble keeping the devices in stock.
But the technology could prove to become a standard for many other apps. Just some of the third-party developers include Uber, Fidelity and Spotify.
Millennial Stocks to Buy Now #4: Netflix, Inc. (NFLX)
When it comes to premium video content, it seems that Netflix, Inc. (NFLX) has cornered the market.
Based on results from Symphony Advanced Media, the streaming giant had the top four series for the fall TV season for U.S. viewers between the ages of 18 to 24: Making a Murderer, Master of None, F Is for Family and Marvel’s Jessica Jones.
But this should be no surprise. Not only has NFLX invested heavily in original content, but has also been smart to leverage analytics and personalization technologies. There is also a seamless user interface that works across a myriad of platforms.
Even though NFLX has been increasing its subscription rates, the current levels are still a good deal, especially compared to a typical cable package. Of course, this discrepancy has been a driving factor for millennials to “cut the cord.”
So far, NFLX is the world leader in video streaming, with a user base of 81.5 million across the globe.
In light of all this, there has been lots of buyout buzz. Just some of the potential suitors include Apple Inc. (AAPL), Alphabet Inc (GOOG, GOOGL) and perhaps Facebook. All in all, these companies have huge amounts of cash and access to enormous amounts of financing. So a deal could be a quick way to get a footprint in a category that is likely to get a long-term boost from the millennials.
Millennial Stocks to Buy Now #5: Match Group Inc (MTCH)
Millennials are waiting longer before getting married. The average is 27 for women and 29 for men (this is according to data from the Census Bureau).
But this should be an opportunity for dating sites like Match Group Inc (MTCH), right? Definitely.
The company operates more than 45 dating sites, like OkCupid, Twoo and Plentyoffish. But of course, Tinder is the real growth story. It’s become the must-have dating app for millennials.
According to the latest earnings report, the app was the top grossing in 74 countries and ranked No. 1 in downloads in 32 countries. During the past year, the number of paid users went from 304,000 to one million. Match also believes that the base will be over two million by the end of the year.
For the most part, the overall growth rate at MTCH has been robust. In Q1, revenues jumped by 21% to $285.3 million and Ebitda was an impressive $64.6 million. Although, given that the monetization of Tinder is still in the early phases, the growth rate could be poised for acceleration in the coming years.
Millennial Stocks to Buy Now #6: Teladoc Inc (TDOC)
OK, then how to play this? Well, one option is Teladoc Inc (TDOC). The company is the first and largest telehealth platform (with 70% market share), leveraging mobile apps and online video. The system has over 3,100 board-certified physicians and behavioral professionals who help with a variety of ailments. The price per visits ranges from $40 to $5 and the satisfaction rate is over 95%.
A key has been relationships with health plans (over 25), which want to provide low-cost quality care. But the company also has over 200 of the Fortune 1000 as clients.
Something else to keep in mind: More and more states are liberalizing their rules regarding telemedicine. And in April, Medicare and Medicaid offered new guidance allowing managed plans to recognize telemedicine as a core part of patient care.
More importantly, there is much room on the upside. After all, there are about 548 million annual patient visits, representing an addressable market of $29 billion.
Millennial Stocks to Buy Now #7: Arista Networks Inc (ANET)
As millennials continue to consume huge amounts of media, there should be a boost in demand for technology infrastructure providers. Keep in mind that this happened back in the 1990s with the internet revolution.
As of now, there are no shortage of companies that are gunning for the opportunity. But which ones are the standouts?
One to consider is Arista Networks Inc (ANET). The company operates a cloud-based networking system, called the Extensible Operating System, that is highly customizable and provides for in-depth analytics, network visibility and improved workflows.
The company also has some of the top minds in the tech industry. For example, the co-founder and chief development officer is Andy Bechtolsheim. Before launching ANET, he helped to create Sun Microsystems. He then went on to build Granite Systems, which he sold to Cisco Systems, Inc. (CSCO).
In other words, Andy knows how to monetize infrastructure technology.
Just look at the recent quarter for ANET. Revenues jumped by 35.3% to $242.2 million and the non-GAAP margins came in at a hefty 64.4%.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.