Millennial wealth is increasing at a rate beyond expectations, presenting potential opportunities for investors.
A recent blog from the US Federal Reserve Bank of St. Louis reports that in 2022, the median wealth of US Millennials born between 1980 and 1989 reached $130,000. This represents a reading 37% above what was previously forecasted. The wealth of younger Millennials (born between 1990 and 1999) outperfomed at a larger rate.
Although a significant recovery in the capital markets has played a role, the majority of this wealth increase stems from the appreciation of nonfinancial assets, such as homes and vehicles. Regardless of its source, the significant wealth increase among the nation’s largest generational group carries profound implications for investment strategies.
More than 70 million Millennial Americans still have their prime earning years ahead of them. As their spending power continues to improve, companies that offer products and services that fit their unique demands will benefit. From travel and dining to fitness and social media, a wide range of industries could emerge winners.
While mega-cap companies like Apple and Amazon are evident choices, numerous other opportunities exist. Smaller companies catering to Millennials’ preferences could experience substantial revenue growth. These ‘under-the-radar’ stocks could catch fire.
Here are a few small cap Millennial consumer stocks that Wall Street predicts will see big gains over the next 12 months.
Accolade (ACCD)
Accolade manages a personalized healthcare services platform covering various categories. Millennial and Gen Z consumers are widely credited with transforming healthcare from the status quo to a business model that better meets their needs. Healthcare systems are responding by offering a more comprehensive list of services, prioritizing mental wellness, and using technology to improve quality and convenience.
Focused on customized healthcare trends, Accolade is building out an ecosystem of in-house and partner services in categories that matter most to younger Americans. Through strategic acquisitions, Accolade has accumulated over 800 provider customers. In fiscal 2023, this translated to 17% revenue growth.
Accolade is still operating at a net loss, but margins are improving. Along with the potential for AI technologies to enhance the consumer healthcare experience, this has analysts calling for 57% upside in Accolade stock.
Angi (ANGI)
Despite a near 90% collapse in share prices over the past five years, Wall Street anticipates that Angi could see notable upside from current levels. Six research firms have given the home projects marketplace provider a buy rating in 2024 while three are sitting on the sidelines and no firms suggest to sell the stock. The average price target is $4.08 which implies a 58% return over the next year.
The Street’s mostly bullish sentiment stems from February’s Q4 earnings release and financial update. Angi reported earnings per share of $0.01, marking its first quarterly profit since Q3 of 2020. Revenue of $300.4 million fell $8.7 million short of expectations, but even when revenue slumped the company was able to achieve profitability.
Should inflation and home equity rates moderate in 2024, we can expect an upturn in consumer demand for home renovation and improvement projects. A return to revenue and profit growth could restore interest in Angi stock.
Cars Commerce (CARS)
Unlike older generations, Millennials are notably more comfortable with online car shopping. They like the broader selection, transparency, and convenience relative to the traditional in-person experience. This makes Cars Commerce a stock to watch over the next few years as more and more auto transactions get done online.
At the heart of its operations, Cars Commerce’s flagship marketplace, cars.com, provides digital services to consumers, dealers, and automakers. Aside from the diversification created by its four platform pillars, the company’s subscription-heavy revenue mix earns its high marks for financial strength.
As younger Americans drive a shift to digital auto solutions, Cars Commerce should be a beneficiary. This secular growth story is probably a key reason behind the stock getting three buy ratings and a $25.00 average price target last month.
