<p>For better or worse, millennials have changed the way our economy works. But millennia will be hardest hit by the economic consequences of the new coronavirus. While some analysts believe that the record high unemployment rate for this generation will be temporary, there is no guarantee. Many of the companies that hired these workers will not return. And when this generation’s purchasing power declines, there are several stocks to avoid even when the economy reopens.
According to the Pew Research Center, millennia are the generation born between 1981 and 1996. This means that they are between 24 and 39 years old. Their lifestyle is governed by some common principles such as sharing economy, emphasis on digital solutions, prioritization of well-being and acceptance of financial technology (or fintech) in combination, or sometimes as an alternative, to traditional banking.
But this generation has also avoided some of the more conventional rites of passage as home ownership. In some cases, millennia do not even own a car. In the name of justice, part of the decision-making process is due to the fact that this generation is more likely to bear a heavy burden on student debt.
But until recent years, many millennia experienced an unemployed recovery in the economy. Their actual job did not reflect their college degree or the cost of that degree.
And that means many millennia are less equipped to navigate the financial burden that will be placed on them. Here are three stocks to avoid as long as millennials are unemployed:
TripAdvisor (NASDAQ: TRIP) Grubhub (NYSE: GRUB) Tesla (NASDAQ: TSLA) Stocks to Avoid: TripAdvisor (TRIP)
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For millennia, how they spend their free time and vacation 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 is the world’s largest provider of bookable experiences.
As proof of this, the company’s Experience and Restaurants unit increased 29% compared to the same period last year during the first quarter of 2019. In fact, the company made an aggressive turn towards the Experience and Dining category. But as a report in Seeking Alpha highlights, this unit was responsible for only $ 5 million in profits 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 study from McKinsey & Co. and the US Bureau of Economic Analysis from 2019 showed that total experience-related expenditure in recent years has increased more than both personal consumption (1.5x) and expenditure on goods (4x).
Not surprisingly, millennia are leading this growth trend. In 2016, this generation spent 62% more on experience-related expenses than Generation X and 37% more than Baby Boomers. Armed with that statistic, it does not take much to connect the points and say that the TRIP share is in a tough year 2020.
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There is a school of thought that says that the new 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 idea is that GRUB shares will benefit as many Generation X and Baby Boomers begin to embrace the company’s services.
The problem with GRUB shares is that there is no evidence that this will actually happen. As InvestorPlace’s Dana Blankenhorn points out, Grubhub can be a lifeline for restaurants, but the length of that lifeline is entirely dependent on demand. And that demand is suppressed. As noble as an idea it may be to order takeout to support the area’s restaurants, there are too many restaurants and simply not enough demand.
More importantly, Grubhub is losing demand in its important demographic. As millennia are forced to cut their budgets, they will reduce spending on pick-up and delivery orders.
The company faced a number of headwinds before the coronavirus. One such issue was competition. Grubhub has never really had a moat. And when it comes to riding, competition is intensifying 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 is not enough evidence to suggest that its Grubhub + will help the company’s hanging results.
And in any case, Grubhub is still trying to remember its competitors.
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Hear me out. No, I do not think millennials competed to order Tesla cars. And I’m aware that the TSLA stock is up again (at the time of writing). The stock has more than doubled since it bottomed out in March. Tesla is a stock that defies conventional measurement values.
However, Tesla is a darling of millennial investors. TSLA is ranked number 11 on the most owned shares in Robinhood. And Robinhood is essentially a trading app for millennia. The average age of investors in the app is 28 years.
Tesla has a history that appeals to this generation. These investors became adults when phrases such as “carbon footprint” and “climate change” became part of our national conversation. Millennial investors are proving more willing to invest in social causes. And that’s what it seems like the story is with Tesla. An investment in Tesla was an investment in a world they wanted.
But the recent volatility in the TSLA stock may have been enough to shake out all but the most true believers. This is what stock market crashes tend to do. For the first time in their investment lives, millennia realize that what goes up can really go down. They may also begin to realize that the basics are also important.
And at a price of over $ 700 per share, I can see how millennial investors can decide that 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. At the time of writing, Chris had no position in any of the above securities.