Following the rapid decline in stocks we witnessed in February and March, many investors have returned to the markets. As a result, a broad range of names has staged a major comeback. Metrics from various brokers highlight that younger people are increasingly buying stocks. Today, I’d like to take a closer look at the five top stocks to buy for Gen Z, also known as Generation Z.
Those born between 1995 and 2010 are considered part of Gen Z. This younger generation comes after the millennials and precedes Generation Alpha. Many experts believe that 85 million Americans are part of Gen Z.
According to research by McKinsey & Company, members of Gen Z “are true digital natives: from earliest youth, they have been exposed to the internet, to social networks, and to mobile systems. … Companies should be attuned to three implications for this generation: consumption as access rather than possession, consumption as an expression of individual identity, and consumption as a matter of ethical concern.”
This generation has also grown up with artificial intelligence tools such as robo-advisors that power modern investing solutions.
Various other studies highlight that member of Generation Z are likely to be more socially conscious than their elders. A recent article by Ching-Hui (Joan) Su of Iowa State University concludes that the cohort cares more about the environment. Additionally, 41% of the generation would pay for premium food they see as “healthy.”
If you are an InvestorPlace reader who is part of Gen Z, know that your generation may be in a solid position to “experiment” with the stock market because of your youth. Put another way, you would stand to benefit the most if you start investing regularly — and early on in life. With all that in mind, here are five top stocks to buy for Generation Z.
- Apple (NASDAQ:AAPL)
- Beyond Meat (NASDAQ:BYND)
- DocuSign (NASDAQ:DOCU)
- JD.com (NASDAQ:JD)
- Lyft (NASDAQ:LYFT)
Top Stocks to Buy: Apple (AAPL)
52-Week Range: $192.58-$399.82
Tech giant Apple will report third-quarter earnings later this month on July 30. Between now and then, many other tech darlings of Wall Street are reporting. Therefore we’ll likely see volatility in the broader markets, which may put pressure on AAPL stock in the short run.
Earlier in April, the company reported muted Q2 earnings. It posted quarterly revenue of $58.3 billion, an increase of 1% year-over-year, and quarterly earnings per diluted share of $2.55. Moreover, international sales accounted for 62% of the quarter’s revenue. In turn, Wall Street noted that revenue growth slowed down as the company saw supply and demand impact from the novel coronavirus. Furthermore, unlike previous earnings releases, the group did not issue guidance.
In recent days, Apple has closed retail stores in a number of states. If the closures become more widespread, AAPL stock may easily be adversely affected. Broader indices, as well as many stocks like AAPL, remain near all-time highs. Year-to-date, Apple shares are up about 34%. So when the company reports, investors will look to justify the jump.
However, young investors of Gen Z should not worry about such potential short-term volatility. The company is likely to keep its leadership position for many years to come. In fact, young investors can possibly regard any drop in price as an opportunity to invest in the top stock. It has long-term catalysts, including the opportunities yet to be offered by the upcoming 5G iPhone.
Beyond Meat (BYND)
52-Week Range: $48.18-$239.71
Beyond Meat produces plant-based meat substitutes. The company was founded in 2009 and went public in 2019. Many scientists and analysts agree that the discourse around reduced consumption of animal-based meat is likely to accelerate in this new decade. And the number of people switching to — or at least trying meatless, plant-based protein — will likely increase.
The group is expected to report Q2 financial results in early August. Earlier in Q1, it posted better-than-expected earnings. Net revenue was $97.1 million, a year-over-year increase of 141%. Net income was $1.8 million, compared with a net loss of $6.6 million a year ago.
Beyond Meat is increasing its restaurant partnerships both in the U.S. and internationally. It also made its first entry into mainland China through a partnership with Starbucks (NASDAQ:SBUX). The quarterly results showed that Beyond Meat has been executing well. However, management warned that it saw a decline in sales at the end of March as the pandemic forced many restaurants to close.
Following the release of the results, investors initially showed their renewed faith in the company. BYND stock increased from the $120-level to over $160 in early June. Now it’s hovering around $130. Put another way, it is about flat for the quarter. In the short run, investors should embrace more choppiness with possibly a downward bias in the shares, especially during this mercurial earnings season.
Yet Beyond Meat will continue to ride the plant-based food tailwinds over the next several years. And that will likely mean substantial gains in revenues and profits, translating into a higher BYND stock price. The future looks bright for Beyond Meat, making it one of the top stocks to buy for Gen Z.
Top Stocks to Buy: DocuSign (DOCU)
52-Week Range: $43.13-$217
DocuSign offers a wide range of products that enable organizations to manage electronic agreements. The group’s initial focus was on providing e-signature solutions. Analysts regard it as the world’s premier electronic signature solution. The group believes the potential global market for e-signatures is around $25 billion. When one considers that its annual revenue is around $1 billion, then how much DocuSign can grow becomes quite clear.
On June 4, the firm released Q1 earnings and posted better-than-expected results for its fiscal first quarter ended April 30. Total revenue was $297 million, an increase of 39% year-over-year.
CEO Dan Springer’s words summed up how DocuSign is riding the work-from-home wave. “Our strong first-quarter results reflect our ability to help organizations accelerate their digital transformation as they adapt to the changing business environment, magnified by COVID-19,” he said.
The work-from-home economy increasingly depends on the ability to create, store and share accurate records. The company says “agreements signed with DocuSign are legally binding in 180+ countries. You can sign agreements in 43 languages and send them in 13, while complying with specific laws and standards.” North America is the largest market.
YTD, DOCU stock is up over 170%. Therefore, there may be short-term profit-taking in the shares. Any potential drop would offer long-term Gen Z investors a better entry point into this top stock.
52-Week Range: $25.77-$69.18
JD.com is headquartered in China, the most populous country in the world. Most market participants are likely familiar with the Chinese e-commerce giant. It also has hundreds of warehouses and thousands of delivery stations as well as fresh food stores across China. Put another way, it is en route to becoming a “leading supply chain based technology and service provider.” In addition to being one of China’s most valuable enterprises, JD.com is a member of the Fortune Global 500.
According to research by the China Center for Economic Research, “the most popular products sold online at JD are cell phones, followed by food and beverages, makeup and cosmetics, digital products, and lifestyle and travel goods.”
The group is expected report Q2 earnings in August. Management expects net revenue to grow between 20% and 30% YOY. In mid-May, the group delivered a strong Q1 performance. Revenue expanded 20.7% from the same period in 2019. Its annual active customer accounts saw a 24.8% YOY growth and reached 387.4 million in the 12 months ending on March 31. Its average daily number of active mobile users surged 46% YOY.
Analysts typically pay special attention to mobile users as they are a crucial driving force of consumer spending in the country. China has the most mobile users in the world. And the mobile market is expected to grow further as China’s cellular infrastructure improves. Revenue in China’s e-commerce market is projected to surpass $41 trillion in 2020. And online shopping represents over a third of China’s total retail market. By comparison, e-commerce in the U.S. represents about 11% of the nation’s total retail sales.
These positive tailwinds make JD one of the top stocks for Gen Z to invest in. YTD, the shares are up about 80%. Any potential dip in price should give long-term investors a better entry point.
Top Stocks to Buy: Lyft (LYFT)
52-Week Range: $14.56-$66.70
So far, it has not been a great year for investors in ride-hailing company Lyft (NASDAQ:LYFT). YTD the shares are down over 30%, currently hovering under $30.
Prior to the outbreak of the coronavirus, Lyft had about 20 million monthly active users. And the company claimed its share of the U.S. ride-hailing market was about 39%.
Lyft is expected to release its next quarterly results in early August. Investors will probably pay special attention to its forecast for the rest of the year. If the company’s outlook is dire, then investors may not yet be ready to take the shares over $30.
The shares of younger, rapidly growing companies tend to be far more volatile than market indices or mature companies. If you are considering investing in the ride-hailing company, you may want to start building a position as the price nears or even dips below $25.
The global ride-hailing market is expected to grow from about $61 billion in 2018 to $218 billion by 2025. That would represent an annual growth rate of almost 20%. In the U.S. there are two major players in the market: Uber (NYSE:UBER) and Lyft. Therefore, Lyft stock is still one of my top stocks to buy for Gen Z.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, including a Ph.D. degree, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.