It's been an exceptionally volatile year on Wall Street, and millennial investors have loved every minute of it.
Online investing app Robinhood, which is best known for offering commission-free trades and gifting shares of stock to new members, has gained millions of new users this year. The average age of Robinhood's users is only 31.
Young people are piling into the stock market -- and that's generally a positive thing.
One stock that's consistently been on the buy list for millennial investors is e-commerce giant Amazon (AMZN -0.47%). Although Robinhood stopped sharing the total number of users that own stocks on its platform in August, we know that it's been a fixture as a top-10 holding for more than a year.
Investors young and old appreciate Amazon for being the most dominant force in U.S. online sales. According to a March 2020 report from eMarketer, Amazon controls nearly 39% of all e-commerce in the U.S. It's expected to expand its share in 2021 to close to 40%. Even with relatively thin retail margins, this dominance has created a loyal base of customers for the company's products and services.
Amazon's high-growth cloud infrastructure segment, Amazon Web Services (AWS), is also valued. AWS is the leading provider of cloud building block services. In the third quarter, cloud service revenue grew by 29% from the prior-year period, with AWS delivering an annual run-rate of more than $46 billion in sales.
Yet, as much as millennials love Amazon, three even more popular stocks have leapfrogged the e-commerce giant in recent days.
A little over a week ago, pharmaceutical stock Pfizer (PFE -1.49%) wasn't even a top 10 holding on the Robinhood platform. But as of this past weekend, it's slotted in as the seventh most-held stock (Amazon is now 10th).
The buzz surrounding Pfizer has to do with the overwhelming efficacy of its coronavirus disease 2019 (COVID-19) vaccine, which was developed with BioNTech (BNTX 1.49%). A primary analysis of BNT162b2 showed a market-topping vaccine effectiveness of 95% in trial participants. Researchers had only been counting on a vaccine efficacy of between 50% and 60%, which is common for annual influenza vaccinations. At 95%, the Pfizer/BioNTech vaccine offers real hope of halting the pandemic, assuming enough people are inoculated.
Pfizer also received a late-week boost following a 17-4 vote (with one abstention) in favor of emergency use authorization from a Food and Drug Administration (FDA) advisory panel. Just a day later, the FDA granted emergency use of BNT162b2. This will give Pfizer a first-mover advantage in the U.S., although it'll likely be short-lived, with Moderna's mRNA-1273 also expected to be gain emergency use authorization soon.
Arguably the biggest challenge for Pfizer is how to get its vaccine from production to end users. It needs to be kept at nearly minus 100 degrees Fahrenheit to remain stable, which may create some logistical nightmares.
Nevertheless, it's still a bit surprising to see a stodgy Big Pharma among millennials' favorite stocks.
Another stock that millennials have put the pedal to the metal on is electric-vehicle (EV) manufacturer NIO (NIO 0.28%). Shares of the company are up 944% in 2020, which is why it's zoomed to the No. 8 spot on Robinhood's leaderboard.
There are both macro and company-specific reasons why investors can't get enough of NIO. On a broad level, there's no denying that EVs are the future of the automotive industry. Having watched Tesla shares gain close to 10,000% over the past decade as the company has gobbled up U.S. EV market share, investors are clearly excited about NIO's prospects of doing the same in China. China is expected to be the largest purchaser of EVs in the world.
At the company level, NIO is starting to run on all cylinders (bad combustion engine pun). Over the past two quarters, it's delivered approximately 22,500 vehicles, which is more than it delivered in all of 2019. More importantly, its vehicle margin has flipped into the positive (14.5% in Q3 2020 vs. minus 6.8% in Q3 2019).
The company has also utilized the huge run-up in its share price in 2020 to raise cash. In fact, the company announced plans last week to sell as many as 69 million shares of stock, which would raise up to $2.8 billion. Once a cash concern, NIO is now swimming with capital.
While longer-term shareholders of NIO are sitting pretty, more recent investors could struggle to net sizable gains. That's because the company is on pace for approximately 50,000 EV deliveries on an annual run-rate basis that's valued at a whopping $57 billion. It could take years before this valuation is supported by NIO's income statements.
The third company that leapfrogged Amazon on Robinhood's leaderboard this past week is Disney (DIS -2.81%).
It's a bit surprising to find the happiest place on Earth occupying a top 10 spot among millennial investors, given how poorly Disney's theme parks have performed this year due to COVID-19. The company's fiscal 2020, which wrapped up on Oct. 3, featured a 6% sales decline and a 45% drop off in operating income. Theme park and product revenue (the company's second-largest revenue generator) declined 37%, with the segment producing an $81 million operating loss. Comparatively, this segment yielded a $6.76 billion operating profit in fiscal 2019.
Despite these headwinds, Disney's push into streaming content has millennial investors jazzed. Last week, positive announcements from Disney's Investor Day sent shares of the company to a new all-time high. Disney+ now has 86.8 million subscribers, which blows its 2019-issued guidance of 60 million to 90 million subscribers by fiscal 2024 out of the water. Disney's new guidance calls for its streaming service to hit 230 million to 260 million subscribers by fiscal 2024.
Disney also announced a $1 per month (14%) price hike to $7.99 that'll take effect in March 2021. The added revenue will be reinvested in new content for Disney+ subscribers.
Ultimately, Disney is an intellectual property treasure. It's one of the few companies that can easily connect with multiple generations at once, and it should have little trouble getting its theme park segment back on its feet once the pandemic has passed.