Millennials seem to get a bad rap, especially when it comes to investing. But is the reality really as bad as it seems, or are millennials just the victim of unfair assumptions spread by older generations? Which stocks are millennials buying right now- and how does the market perceive these stocks?
We set out to find which stocks Generation Y are busy snapping up based on data collated from the 120,000 active portfolios in our Nasdaq Smart Portfolio.
We wanted to extract new insights from this valuable data and show how age and investing interact. A recent American Funds survey of 1,203 adults showed that only 44% of millennials see themselves as long-term investors and think that market fluctuations are natural. How does this effect the stock choices of millennials? We looked at the percentage each stock was held in the portfolio groups of the millennials to discover their five most popular stocks.
Crunching the data gave us the following results: Apple, Facebook, Amazon, Microsoft, and a more risky fifth choice in Tesla. We can see that, in contrast, those who are over 60 prefer to stick to more traditional companies such as AT&T, Verizon, and General Electric. But as we can see in the chart below, the tech sector is the most popular for all ages, with the consumer goods coming in at third place, largely thanks to Apple.
Now let’s delve deeper into each of these five stocks and see if the Street approves of millennials’ top stock picks.
1. Apple (AAPL): 22.3% of millennial portfolios hold shares in iPhone maker Apple. This is hardly surprising- the Smart Portfolio crowd insights page shows that Apple is easily the most popular stock across all portfolios regardless of age. Indeed, the average best-performing Smart Portfolio has a whopping 22% of its total holdings invested in Apple.
And it’s not just investors that are bullish on Apple; so are analysts. If you check out TipRanks Apple stock analysis page you can see that over the last three months, 27 buy and 4 hold ratings have been published on the stock. Now five-star RBC Capital analyst, Amit Daryanani, has predicted that Apple could be the world’s first trillion-dollar company within the next 12-18 months.
Daryanani says Apple will see higher revenue growth as the iPhone ASP (average selling price) rises to over $ 800. He reiterated his AAPL buy rating on May 21 with a bullish $ 168 price target (9.1% upside potential from the current share price).
2. Facebook (FB): 14% of millennial portfolios hold shares in this social media giant. Given that over 40% of millennials use FB every single day, it makes sense that this is millennials’ second most popular stock. We can also see from the crowd insights page that millennials are slightly more likely to hold the stock than older generations.
Overall the stock has a very strong buy rating from analysts, with 32 buy ratings and only 1 hold rating published on FB in the last three months. Top Needham analyst Laura Martin says that an ad exec she spoke to expects social media spending to increase at least 25% in 2017 and that FB remains a clear winner for 2017.
Meanwhile, the average analyst price target of $ 172 suggests that the stock has significant upside potential over the next 12 months of at least 16%.
3. Amazon (AMZN): 11.7% of millennials hold this e-commerce retailer in their portfolios. The figure comes in slightly below the 12.77% of portfolios from all age groups that hold the stock. Analysts also have a Strong Buy consensus with a $ 1,090 12-month price target (12% upside from the current share price of $ 972). We can see that there is a significant range in price targets of $ 400, from just $ 850 on the low to $ 1250 on the high.
According to JP Morgan’s top analyst Doug Anmuth, the stock should hit $ 1150 in the next 12 months. He is bullish on the stock’s prospects at taking increased market share in the e-commerce market. By 2019, Anmuth is predicting that Amazon will have 50% of the e-commerce market up from 38% in 2016.
“We believe Amazon continues to show strong ability to take share of overall e-commerce, and its flexibility in pushing first-party vs. third-party inventory and its Prime offering both serve as major advantages” Anmuth wrote on May 17.
4. Microsoft (MSFT): Close to 10% of millennial portfolios include Microsoft as one of their stock picks. Encouragingly for these millennials, analysts are forecasting upside of just over 8% for MSFT over the next twelve months from the current share price of $ 68.62. Out of the 17 analyst ratings published on the stock in the last three months, there is only 1 hold and 1 sell rating. This is from five-star Jefferies analyst James Kisner who has a shockingly low $ 45 price target on MSFT, $ 30 below the average price target.
5. Tesla (TSLA): 7.7% of millennial portfolios are betting that this ambitious automaker will succeed in its plans to disrupt the traditional auto industry. But disturbingly, Tesla does not feature as one of the top ten stocks most held by the best-performing Smart Portfolios (collated from all age groups). Analysts are very divided on the stock’s outlook, although only two analysts in the last three months have actually published a sell rating on the stock. More worryingly for millennials is that the price target of $ 270 is now a -12% downside from the current share price of $ 307.
Bernstein analyst Toni Sacconaghi recently wrote about the disappointing customer service he received from Tesla first-hand and his fears that the company is already overstretched even before the ramp up of the upcoming Model 3 vehicle. Morgan Stanley meanwhile is concerned that Google’s Waymo/Lyft partnership is becoming an emerging competitor to Tesla’s driverless cars.
So what can we conclude? It seems that the market agrees with four out of five of millennial stock choices. And as for Tesla, well, sometimes it doesn’t hurt to dream.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.