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Gen Z’s best stocks
According to a Cowen report released Wednesday, the cohort of shoppers already accounts for about 20% of annual expenditures in the United States and is expected to inherit roughly $60 trillion in wealth by 2050.
“The largest wealth transfer in history is underway,” John Kernan, the report’s lead analyst, said”
According to the report, Gen Z and millennial consumers will account for roughly 68 percent of the global population by 2028, up from 50 percent today.
According to Cowen, Gen Z and millennials will shake up businesses across sectors with an emphasis on sustainability, social commerce, and digital shopping due to their increased purchasing power.
In July, Cowen surveyed 1,200 U.S. adults aged 18 to 34 to identify consumption and brand preference trends. Cowen highlighted its favorite stocks based on the findings in order to capitalize on what it calls the “rapid ascension” of the youngest cohort of shoppers.
Here are Cowen’s top five Gen Z and millennial stock picks.
Amazon
The e-commerce behemoth is a popular destination for Generation Z and millennial customers. More than six out of ten respondents in the 18 to 34 age group said Amazon was their preferred shopping channel. Amazon stock price today is $3,304.67.
According to the survey, Amazon is also the most common place for consumers to begin searching for a product and researching a product prior to purchase, both in-store and online.
Mexican restaurant Chipotle
Cowen discovered that younger shoppers in the United States are more likely than older counterparts to consider food transparency when deciding where to eat. According to the survey, ordering food online and using delivery services is also popular among Gen Z and millennials.
The company favors Chipotle Mexican Grill, which it considers to outperform, as a way to capitalize on both dining trends.
Lululemon
Cowen discovered that athletic apparel maker Lululemon’s brand appeal is rapidly growing among young shoppers.
Lululemon was preferred by 9 percent of 18- to 24-year-olds in the casual lifestyle apparel segment, up from 4 percent in 2019.
Poshmark
With the emphasis on sustainability for Generation Z and millennials, more younger customers are shopping resale.
The number of 18- to 34-year-olds using a resale marketplace to buy secondhand clothing, footwear, or accessories increased by a third year over year.
Cowen likes online resale platform Poshmark because it has the most users compared to companies like StockX and GOAT.
PayPal
According to Cowen’s survey, younger consumers are increasingly using digital payment solutions when shopping.
Disney is still a top stock
Shares began to return all gains due to solid fiscal gains in the third quarter. Revenue from the company’s Disney+ unit rose to $4.3 billion, but the operation lost money. An increase in open interest levels in the company’s October options may be a result of this. Now that immunization rates have increased, the momentum has shifted at Disney. It looks like the stock tried on August 13th but failed, forming what appears to be a bearish descending triangle.
When the stock price drops below the $168 support, this could lead to lower prices in the coming weeks. For example, the stock could rise to $154 or fall to $127 during the last period of the day.
Disney is by far the largest media and entertainment conglomerate in the world. With an extended multigenerational audience, the company is one of the most popular and identifiable brands globally. The Media Networks section, which includes ABC, ESPN, and Disney Channels, will account for 40% of all sales in 2020. In addition, Disney saw profits jump due to the merger with 21st Century Fox in the first three months of 2019. the entertainment powerhouse claimed its net revenue rose more than 85% to $5.4 billion.
Disney is in the rare position of owning a distinctive brand led by many creative production studios such as Marvel, Pixar, and Lucasfilm. This corporate milestone was reached on October 2, 2020, when the Walt Disney Company obtained 2,225 active patent families protected by the US Patent Office. Disney knows how to leverage each character’s intellectual property most efficiently and incorporate it elsewhere. According to LIMA, entertainment and nature licensing generated $107.2 billion in retail sales. Because Disney controls the markets for cable sports and adult entertainment networks, it is the dominant company in these categories.
His results were remarkable. It is responsible for 14 of the 20 highest-grossing films of all time. In addition to Disney Channel, Disney XD and Disney Junior, the Disney company has a strong presence in the children’s entertainment market with Disney Channel, Disney XD and Disney Junior networks. The diverse set of content that Disney can optimize is a significant source of new content as remakes, sequels, and franchises are created. The global amusement park market will expand to $99.34 billion by 2027, with an estimated growth rate of 8.8%. The Walt Disney Company has a 52% market share in the business.
In October 2021, Disney will celebrate its 50th anniversary with the introduction of several new toys. In addition, different technology will be implemented to ensure the safe reopening of parks. Although it faces the same risks as its competitors, Disney is the least negatively affected by the pandemic. After the Ebola crisis, Disney reported a 37% reduction in sales compared to the previous epidemic. Still, it is faring worse than its competitors. Disney’s revenue growth is approximately 5.7% per year, with gross and net margins of 41.8% and 13.17%, respectively.
Except in 2019, the company’s operating cash flows grew gradually. Studio Entertainment revenues are determined by multiplying the total available seating capacity by the average ticket price per person. The percentage change in TV viewing is multiplied by age and divided by each channel’s target audience to calculate the network’s advertising revenue. However, 3% growth is projected due to pandemic constraints. Analysts project revenues to increase 95% by 2022.
Disney’s revenue is expected to grow 8.5% in 2021, with considerable growth from its platforms. It is streaming in the short term before increasing rapidly in 2022 due to more visitors to its theme parks and hotels. A DCF analysis of the main rivals within each category was used to define the company’s valuation. An increase of 6.65% is expected over an EV/EBITDA of 22.71x and a discount rate of 10.2%. DIS stock price today is $174.76.
The five best stocks for this upcoming earnings season
Goldman expects stocks to rise 6% this quarter based solely on the relationship with quarterly earnings.
Goldman screened the 1,000 companies in its coverage universe for the top 25 opportunities, looking for stocks with earnings of more than five cents per share over the next four quarters. The company then filtered for stocks where its analysts are above or below Thomson Reuters’ consensus for the upcoming quarter and year “on a key financial metric.”
Goldman also suggests purchasing out-of-the-money calls on these stocks.
The note stated that “single stock put-call skew is at its highest level in over a year.” “Given investors’ well-hedged position, even modest earnings beats are likely to drive a relief rally in specific stocks (on earnings day) and the broad index (over the next three months.”
Here are their five “most out-of-context” picks for the quarter.
Goldman sees a 37% increase in Uber’s stock price over the next year, and its analysts’ earnings estimates for the company are 20% higher than the consensus. According to analyst Eric Sheridan, the ride-sharing company could be the next large-cap platform ecosystem. According to him, the closing supply-demand gap should result in more normalized rider pricing, demand improvements, and pre-Covid levels of profitability.
Goldman sees Bank of America, which reports Thursday morning, as one of the largest earnings beneficiaries of “significant remixing of cash into securities” among the top banks. It sees a 7% increase, which is 10% higher than the consensus estimate.
According to Goldman, among smaller banks, Signature Bank is poised for a revenue beat driven by loan growth, with a 15% upside to the stock. Analyst Ryan Nash’s earnings estimate is 7% higher than the consensus for this quarter and 5% higher for the next four quarters.
According to analyst Kate McShane, macro indicators can support Lowe’s demand beyond 2021. She believes the stock has a 12% upside and that it is better positioned than it was six months or even a year ago as a result of bringing seasonal inventory purchases forward earlier in the year.
Credit Suisse 7 best stocks
Every quarter, the Swiss bank publishes a list of 30 stock recommendations based on its proprietary cash flow analysis to assess companies’ future expected performance.
“For Q4 [fourth quarter] 2021, our stock selection will primarily focus on high operational quality companies with attractive valuations and strong momentum,” the bank stated in an Oct. 4 note.
This quarter’s picks include seven new additions to the list that the Swiss bank considers “best-in-class.”
According to the bank, integrated oil and gas company OMV is the only energy player on the list this quarter after delivering the second-highest returns among its peers in 2020. Analysts also like the Austrian company because of its lower debt level in comparison to its European peers, as well as its ability to service its commitments and make capital allocation decisions. The analysts, led by Hiten Patel, wrote in the note that the company’s valuation could increase by 15% in the long run.
Credit Suisse sees technology group Andritz as a strong momentum play in the industrials sector. The industrial machinery supplier’s stock has “returned 26.4 percent over the last six months, outperforming its European peers by nearly 20 percent.” “Momentum remains strong,” the analysts said, giving it a 20% potential upside. Andritz is also liked by the Swiss bank for its ability to meet its obligations.
Bucher, a Swiss technology group, is another industrials name that Credit Suisse likes. According to the analysts, it is a “best-in-class name” with “strong wealth creation principles throughout its history” and a track record of “growing into increasing returns during cyclical upswings.” While the pandemic had an impact on returns, analysts believe they will return to pre-pandemic levels this year. According to the analysts, the stock has a 25% potential upside.
Credit Suisse also likes SAP, a provider of software and technology solutions, because of its consistent returns over the last two years. It also supports the company’s shift in business model from licensing to cloud and web-based software products, as well as its “holistic offering for business transformation in the cloud.” According to the Swiss bank, SAP is undervalued in comparison to its global peers, with a potential upside of 34%.
VGP, a Belgian-based real estate developer, completes the list of “best-in-class” new additions. According to Credit Suisse, the company has “one of the strongest momentum profiles in European real estate,” as well as a strong development pipeline with 42 sites currently under construction. In addition to the expansion of its land bank, the company has strong pre-leasing commitments, according to the analysts. They estimate a 15% gain in the stock over the next five years.
Asia stock picks
“In the context of rising energy prices, fuel suppliers (coal miners and oil and gas explorers) are obvious gainers,” BNP Paribas said in a report last week.
“In addition, we believe that the ongoing energy crisis should heighten governments across Asia’s focus on renewable energy,” it added.
BNP Paribas identified Asian ex-Japan stocks with a market capitalization of $5 billion or more as beneficiaries of the energy crisis.
BNP Paribas declares “winners”
The following stocks were included in the bank’s “winners” basket:
China
China Shenhua Energy, China Coal Energy, Shanxi Coking Coal Energy, and Yanzhou Coal are coal miners.
CNOOC and PetroChina are two oil exploration and refining companies.
China Longyuan Power and CGN Power are two examples of renewable energy companies.
South Korea
Oil exploration companies or refineries: S Oil
India
Coal India is a coal miner.
ONGC and Reliance Industries are two oil exploration and refining companies.
Adana Green Energy is a provider of renewable energy.
Indonesia
Adaro Energy, Bukit Asam, and Indo Tambangraya Megah are coal miners.
Thailand
Banpu Public Co. is a coal miner.
PTT Exploration & Production and Thai Oil are two oil explorers and refiners.
… as well as ‘losers’
BNP Paribas also identified 18 stocks as “losers” as a result of rising energy prices, with all but one coming from China.
Thermal power generators in China face squeezed margins as input costs rise due to rising coal prices and government-controlled electricity tariffs, according to the bank.
Morningstar has identified two stocks that are “more sheltered” from China’s technological scrutiny.
UBS selects its top investment ideas for China, including ‘high quality’ real estate investments.
Goldman Sachs recommends China chip stocks to buy as the US-China tech rivalry heats up.
In the short term, gas distributors face similar challenges, according to the bank. It explained that those companies can pass on higher costs to customers, but that this usually takes some time.
Meanwhile, energy-intensive industries such as steel, aluminum, chemicals, and cement may suffer as a result of Chinese production cuts and rising energy costs, according to BNP Paribas.
The following Chinese stocks are included in the bank’s “losers” basket:
China Resources Power, China Power International, Huaneng Power International, and Huadian Power International are thermal power generators.
China Gas Holdings, China Resources Gas, ENN Energy, Hong Kong and China Gas Co., Kunlun Energy are gas distributors.
Aluminum Corporation of China, Baoshan Iron & Steel, Angang Steel Co, China National Building Material, Anhui Conch Cement, China Resources Cement
China National Chemical Engineering and Zhejiang Longsheng Group manufacture industrial chemicals.
Indraprastha Gas, India’s gas distributor, is the only non-China losing stock in BNP’s basket.
Stifel upgrades UPS
Analyst J. Bruce Chan raised UPS stock from hold to buy in a note to clients on Thursday, saying that rising shipping rates and surcharges should help UPS through the holiday shopping season and into 2022.
“Right now, we think there’s a lot to like about the fundamental UPS story.” Despite tough comps, Ecommerce continues to drive secular volume growth in the company’s core small package unit, and continued yield management focus, in our opinion, is a boon in an environment with ample near term rate momentum,” the note stated.
“With strong free cash flow and a healthy dividend yield, our only concern had been valuation.” “However, with prices now in, and our forecast for a solid peak season, we believe UPS represents a good opportunity here,” the note said.
UPS’s price target has been raised to $224 per share from $210 per share by Stifel. The new target is 21.7 percent higher than the stock’s closing price on Wednesday.
