RVLV - Boomer stocks are a better buy than Millennial stocks - BofA
2023-10-25 11:27:02 ET
Goods and services directed at the Boomers generation have had better success in comparison to those directed at younger generations, according to a BofA Securities’s U.S. Equity Strategy report, published on Wednesday.
Boomers, born between 1946 and 1964, are the beneficiaries of the great wealth transfer, where households’ net worth increased from $17T to about $150T as government debt rose from 31% of GDP to 120% since the 1980s. They now hold about two-thirds of the wealth, most of which is in financial assets such as real estate.
Data from Bank of America showed that Boomers and Traditionalists are the only groups that have increased consumer spending, as trends in spending have declined.
According to BofA, Boomers are reportedly spending more on travel, health care, entertainment, and home improvement. As a comparison, Millennials spend more on housing and apparel.
Toll Brothers ( TOL ), Welltower ( WELL ), Service Corporation International ( SCI ), and American Express Co. ( NYSE: AXP ) are strong buy stock ideas, whereas Revolve Group ( RVLV ) — a Millennial brand — is underperforming.
As an example, Toll Brothers ( TOL ), over the past several years, has expanded its active adult and affordable luxury presence “to diversify its customer base and revenue stream,” the BofA report said. “Age-targeted communities as a percent of total units have increased to about 20% (vs. 16–17% in fiscal year 2019), while affordable luxury communities have grown to 45% in fiscal year 2023 from about 35% in 2019.”
In addition, Service Corp. ( SCI ), the largest funeral and cemetery operator in the US, has invested from $80M to $100M annually to develop cemetery properties and has seen sales grow at a 15% CAGR from 2015 to 2021, according to a BofA analyst.
When it comes to American Express, the report also said, “We think ( AXP ) is a beneficiary of the Boomer’s boom theses.”
They represent about a third of the U.S. consumer billings at Amex, and 13% of the total spending on all credit cards. Generation X encompasses about another third, and Millennials and Gen Z share the other third.
On the other hand, “Millennials are more pressured by inflation and higher housing expenses, but account for more of the apparel spending,” said another BofA analyst. “We see the most risk to womenswear apparel retailers such as underperform-rated company Revolve ( RVLV ), which has a younger target demographic of Gen Z and Millennials.”
More on American Express:
- American Express Company (AXP) Q3 2023 Earnings Call Transcript
- American Express Company 2023 Q3 - Results - Earnings Call Presentation
- American Express: Pullback Opportunity With Great Growth
- American Express raised to Neutral as Citi sees less downside risk
- American Express upgraded to Neutral at Piper as slower growth is priced in
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Boomer stocks are a better buy than Millennial stocks – BofA