For better or worse, millennials have changed the way our economy operates. However, millennials will be the hardest hit by the economic repercussions of the novel coronavirus. While some analysts believe the record high unemployment for this generation will be temporary, that is not a guarantee. Many of the businesses that employed these workers won’t be coming back. And as this generation’s buying power diminishes, there are several stocks to avoid even as the economy reopens.
According to the Pew Research Center, millennials are the generation born between 1981 and 1996. This puts them between 24 and 39 years of age. Their lifestyle is ruled by a few common principles such as a sharing economy, an emphasis on digital solutions, a prioritization of wellness and an acceptance of financial technology (or fintech) in conjunction, or sometimes as an alternative, to traditional banking.
But this generation has also avoided some of the more conventional rites of passage such as home ownership. In some cases, millennials don’t even own a car. In fairness, some of that decision making process is because this generation is more likely to carry a high load of student debt.
However, until the last few years, many millennials were experiencing a jobless recovery in the economy. Their actual jobs did not reflect their college degree, or the cost of that degree.
And that means that many millennials are less equipped to navigate the financial strain that will be imposed upon them. Here are three stocks to avoid as long as millennials are unemployed:
Stocks to Avoid: TripAdvisor (TRIP)
For millennials, how they spend their leisure and vacation time is often measured by what they do more than where they go. TripAdvisor was among the first to embrace this trend in the early 2000s. In fact, TripAdvisor claims to be the world’s largest provider of bookable experiences.
As evidence of that, the company’s Experience and Restaurants unit saw 29% year-over-year growth in the first quarter of 2019. In fact, the company made an aggressive pivot toward the Experience and Dining category. But as a report in Seeking Alpha highlights, this unit was responsible for only $5 million in profit for the company in 2019. And the company is experiencing increasing competition from Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) which has led to massive job cuts at the company.
A 2019 study by McKinsey & Co. and the U.S. Bureau of Economic Analysis found that in the past few years overall experience-related spending has grown more than both personal consumption (1.5x) and spending on goods (4x).
Not surprisingly, millennials lead this growth trend. In 2016, this generation spent 62% more on experience-related expenses than Generation X and 37% more than the Baby Boomers. Armed with those statistics, it doesn’t take much to connect the dots and say that TRIP stock is in for a rough 2020.
There is a school of thought that says the novel coronavirus may be the moment that Grubhub has been waiting for.
Since closing at a multi-year low of $30.13 on March 23, the stock has climbed nearly 40%. The thinking is that GRUB stock will benefit as many Generation X and Baby Boomers begin to embrace the company’s services.
The problem for GRUB stock is that there is no evidence that this will actually happen. As InvestorPlace’s Dana Blankenhorn points out, Grubhub may be a lifeline for restaurants, but the length of that lifeline is totally dependent on demand. And that demand is suppressed. As noble as an idea as it might be to order takeout to support area restaurants, there are too many restaurants and simply not enough demand.
More importantly, Grubhub is losing demand in its key demographic. As millennials are forced to cut their budgets, they will cut spending on take-out and delivery orders.
The company was facing a number of headwinds prior to the onset of the coronavirus. One such issue was competition. Much like ride-hailing companies, Grubhub has never really had a moat. And speaking of ride-hailing, the competition is getting more intense with Uber (NYSE:UBER) taking market share with its Uber Eats initiative.
The company is trying to “Amazon-ize” its business by going to a subscription model. But there’s not enough evidence to suggest that its Grubhub+ will help the company’s sagging bottom line.
And in any event, Grubhub is still trying to play catch-up to its competitors.
Hear me out. No, I don’t think that millennials were racing out to order Tesla cars. And I am aware that TSLA stock is on another run (as of this writing). The stock has more than doubled since hitting a bottom in March. Tesla is a stock that defies conventional metrics.
However, Tesla is a darling of millennial investors. TSLA ranks number 11 on the most commonly owned stocks on Robinhood. And Robinhood is essentially a trading app for millennials. The average age of investors on the app is 28.
Tesla has a story that appeals to this generation. These investors came of age as phrases like “carbon footprint” and “climate change” became part of our national conversation. Millennial investors are showing themselves to be more willing to invest in social causes. And that’s what it would seem the story is with Tesla. A bet on Tesla was a bet on a world that they wanted.
But the recent volatility in TSLA stock may have been enough to shake out all but the truest of true believers. That’s what stock market crashes tend to do. For the first time in their investing lives, millennials are realizing that what goes up really can go down. They may also start to realize that fundamentals matter as well.
And at a price of over $700 per share, I can see how millennial investors may decide there are better options.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris did not hold a position in any of the aforementioned securities.