Millennials, who are about 25 to 40 years old, are now in their prime spending years. They overtook baby boomers as America's largest generation in 2019, and they spent $1.4 trillion globally last year.
Those growth forecasts make millennials a coveted audience for many companies. However, millennials often buy different products and use different services than older generations. Last November, I highlighted Snap, Match, and Etsy as millennial-oriented stocks that were poised for a bull run.
All three stocks have generated positive returns since then, with Etsy leading the charge with a gain of roughly 65%. I'm still bullish on those three stocks, but today I'll highlight three other millennial-oriented stocks that could also head much higher this year: Bumble (BMBL 6.23%), Square (SQ 6.80%), and Pinterest (PINS 4.07%).
1. Bumble: Match's biggest rival
Whitney Wolfe Herd, who previously co-founded Match-owned Tinder, co-founded Bumble in 2014. It owns two dating apps: Bumble, which only lets women initiate conversations, and Badoo, an older dating app that is more popular in Europe and Latin America.
Bumble ended the third quarter of 2020 with 12.3 million monthly active users (MAUs) on Bumble and 28.4 million MAUs on Badoo. Bumble and Badoo have 1.1 million and 1.3 million paid users, respectively.
The balance might seem odd, but Bumble's eponymous app actually generates much higher average revenues per user than Badoo. It's also growing its audience at a much faster rate. That's why 61% of Bumble's revenue came from its namesake app in the first nine months of 2020.
Like Match's Tinder, Bumble and Badoo operate freemium platforms, which encourage users to pay for perks like unlimited swipes and the ability to see who likes them right away. Bumble's revenue rose 36% in 2019, but it grew just 4% year over year in the first nine months of 2020 -- with Badoo's declining revenue partly offsetting Bumble's growth. The company posted a net profit in 2019, but it dipped back into the red in the first nine months of 2020.
Those growth rates might seem unimpressive, but Bumble's growth could accelerate significantly after the pandemic ends. Its female-first approach could pull Gen Z and millennial women away from Tinder, Hinge, and other dating apps, and it's still expanding its female-centric ecosystem with Bumble BFF for platonic friendships and Bumble Bizz for business connections.
2. Square: The fintech disruptor
Gen Z and millennials are more likely to use online payment services and mobile apps than older generations, according to PaySafe. Square is a disruptive force in those fintech markets.
Square initially disrupted the traditional POS (point-of-sale) system market with iPhone and iPad-based payment platforms, expanded its ecosystem into stand-alone POS systems, and eventually became a leader in peer-to-peer payments with its Cash App.
It subsequently added Bitcoin (BTC 2.32%) purchases and free stock trades to Cash, which made it a popular all-in-one fintech platform for younger users. Square ended 2020 with 36 million transacting users on Cash -- up 50% from a year ago.
Square's big bet on Bitcoin trades -- which reflects co-founder and CEO Jack Dorsey's commitment to the cryptocurrency -- offset its declining transaction fees throughout the pandemic, but its higher dependence on those crypto trades squeezed its gross margins. Nonetheless, Square's adjusted EBITDA still increased 14% for the full year.
Analysts expect Square's revenue and adjusted earnings to climb 45% and 46%, respectively, this year, as its core market of smaller businesses recovers in a post-pandemic world. The popularity of Cash, especially among Gen Z and millennial users, should complement that growth.
Square's stock isn't cheap at 115 times forward earnings, but its early mover's advantage in online payments and Cash's long runway arguably justify that premium valuation.
3. Pinterest: The social shopping play
When Pinterest went public in 2019, it claimed to serve 43% of all internet users in the U.S., including "approximately 80% of women" between the ages of 18 to 64.
That's a wide age range, but Pinterest disaggregated some of its demographic growth rates last June. Its number of Gen Z and millennial users increased 50% and 36% year over year, respectively. Gen Z users were seeking out more social justice, beauty, and fashion ideas, while millennials were mainly looking for new life skills and fresh ideas for family activities.
Those growth rates indicate that Pinterest's platform of virtual pinboards is becoming a visual search engine for ideas instead of a traditional social network. That unique niche makes it a natural fit for retailers to upload their entire catalogs or sell their products directly via shoppable pins.
That's why Pinterest is still growing like a weed. Its revenue rose 48% in 2020, and its total MAUs increased 37% to 459 million. Its adjusted EBITDA also increased more than 18 times year over year.
Analysts expect Pinterest's revenue and adjusted earnings to rises another 48% and 47%, respectively, this year as it locks more pinners and advertisers into its platform. Pinterest's stock also isn't cheap at 55 times forward earnings, but I believe its unique niche easily justifies that slight premium.