Merrill Lynch Identifies Top Thematic Stock Picks for the Rise of Millennials

March 4, 2016 by Jon C. Ogg

Thematic investing is one of those areas that sound great, because the aim is to capitalize on the themes that will prevail for the years or decade ahead. It also sounds a lot easier than it turns out to be.

Bank of America Merrill Lynch has identified its top quarterly primer picks in several aspects for “A Transforming World,” and the millennials (or Generation Next) is one of those themes.

The Merrill Lynch report sees millennials being the number one global and U.S. demographic, and it sees them being the number one group in income and wealth by 2025. This creative disruption of the age group is changing sectors like autos, dining, finance, media, tech and travel.

Here are the top thematic picks from Merrill Lynch to profit off of the trends driving millennials.

Amazon

Amazon.com Inc. (NASDAQ: AMZN) was the top pick for services and shopping use for millennials. The attraction here is Amazon’s leadership in e-commerce, the potential for delivery drones and, of course, for Amazon Web Services. Amazon is rated as Buy at Merrill Lynch with a price objective of $750.00.

Shares of Amazon traded at $577.49 on Friday. The stock has a consensus analyst target of $736.27 and a 52-week trading range of $365.65 to $696.44.


Comcast

Comcast Corp. (NASDAQ: CMCSA) was picked as the number one U.S. cable services provider. This almost seems odd when you consider that the cord-cutting theme is being led by millennials. Still, as has been said often, that fat data pipe has to come from somewhere, and at the end of the day they may still opt for a skinnier bundle and supplement their media with over-the-top services.

Merrill Lynch has a Buy rating and an $84.00 price objective. Comcast shares recently traded at $59.92, with a consensus price target of $69.44 and a 52-week range of $50.00 to $64.99.

Facebook

Facebook Inc. (NASDAQ: FB) was selected as the top social network that is taking over the world. While not all younger people are Facebook addicts, the one undeniable truth is that Facebook is succeeding in mobile content expansion while others are still suffering from it. Facebook was rated as Buy at Merrill Lynch, which has a $140 price objective.

Facebook shares traded at $109.58, with a consensus analyst target of $133.49 and a 52-week range of $72.00 to $117.59.

Netflix

Netflix Inc. (NASDAQ: NFLX) was selected in the thematic media trends, even if this may be a favorite for those who are not millennials. Netflix has nosebleed valuations, and Merrill Lynch has a Buy rating and a whopping $164.00 price objective.

Netflix was last seen trading at $97.93, within a 52-week range of $58.46 to $133.27. The consensus analyst target is $124.95.

Urban Outfitter

Urban Outfitters Inc. (NASDAQ: URBN) was selected by Merrill Lynch as a top thematic play for millennials due to its unique private and third-party apparel selections. Maybe even millennials need to actually go try on $200 jeans before they buy them. Urban Outfitters is worth about $3.2 billion, but what is interesting here is that this is also a value investing stock now.

The firm has a Buy rating and a $30 price objective on Urban Outfitters. Its shares traded at $27.43. The consensus price target is $26.93, and the 52-week range is $19.26 to $47.25.

GrubHub

GrubHub Inc. (NYSE: GRUB) was selected for its role as the number one online takeout provider. GrubHub is rated as Buy and comes with a $35 price objective at Merrill Lynch.

The shares were recently trading at $23.71, with a consensus analyst target of $29.68 and a 52-week range of $17.77 to $47.95.

Kate Spade

Kate Spade & Co. (NYSE: KATE) was selected for being affordable luxury for the haves and almost haves in the millennials generation. This one is worth roughly $3 billion in market cap. It is also rated at Buy and comes with a $31 price objective.

Shares of Kate Spade were last seen at $23.07, with a consensus target price of $27.47 and a 52-week range of $15.10 to $35.23.

Take-Two Interactive Software

Take-Two Interactive Software Inc. (NASDAQ: TTWO) was selected as a top provider in interactive gaming software, particularly with a focus on the Grand Theft Auto series that performs well with each new release. Merrill Lynch has a Buy rating and a $43 price objective.

Take-Two shares recently traded at $36.57, with a consensus analyst target of $40.75 and a 52-week range of $23.30 to $37.71.