Wondering what stocks Generation Z would invest in? There's no better way to answer this than to just ask them for their perspective.
As Motley Fool summer investing interns and Gen Z members, we, Parker Hartzell and Madeline Walsh, have some ideas. We're college students studying finance at Virginia Commonwealth University and The College of William & Mary. Looking at stocks through the lens of Gen Z investors helped us find companies with products our generation uses and enjoys.
Gen Z is often defined as people born between 1996 and 2012, most of whom grew up using technology and who now prioritize convenience. We suggest Gen Z investors look into Uber (UBER -0.74%) and Dutch Bros (BROS 1.94%), because we believe they focus on technology and the convenience of their customers.
Here's why you should consider buying them now.
Get both ride-sharing and delivery
Madeline Walsh (Uber): The boomer said, "Call a taxi!" Gen Z replied, "Taxi who? Let's Uber!" Uber is a spin on classic taxi and delivery services in which drivers use their personal vehicles to pick up passengers and take them to their desired destinations or to deliver food or other items. As independent contractors, drivers choose when to work.
Uber has three segments -- mobility, delivery, and freight -- which is a different business model than used by competitors like Lyft. Mobility involves ride-sharing; essentially, it's a taxi service, but riders can book it all on the app and track their ride. Delivery involves food, grocery, and other goods transported to consumers from a restaurant or other location. In 2022 and 2023, mobility and delivery revenue increased by 41% and 12%, respectively. Freight provides pick-up and delivery services for carriers' shipments. Freight revenue decreased by 24% due to fewer bookings, which the company says is due to the freight market cycle.
As a Gen Zer, I've used the Uber app for all of my ride-sharing and delivery needs, especially on my college campus, where I don't have a car. The app is user-friendly, it offers a lot of flexibility, and the rides and deliveries are reasonably priced.
Uber's competitive advantage is its large global user base. It could be a great investing pick for those looking for long-term growth, since Gen Z isn't likely to revert to inconvenient sources. It's also a well-known brand, and popular because of its large network and reasonable prices. It's quite telling that many use the name as a verb -- "Let's Uber!" -- which puts it on a brand-recognition level similar to Kleenex, Band-Aid, and Google.
The company has significant opportunities for future growth, especially with the rise of autonomous driving; since one of its largest costs is drivers, Uber could potentially reduce future expenses. However, this could also pose a risk if it can't keep up with technological change. Another risk is being outperformed by robotaxis from competitors, such as Lyft, Alphabet's Waymo, or Tesla.
I offer my perspective on Uber as a member of Gen Z, but also as a young investor. Ask other members of Gen Z their thoughts to see if they agree.
Have your drink your way
Parker Hartzell (Dutch Bros): On the first Wednesday of every month, drive-thru-centered coffee chain Dutch Bros gives away a limited amount of new free stickers to personalize customers' belongings. Because a finite number is given to each store, they've become collectible items, mostly among Gen Zers and millennials. People put these stickers on their water bottles, laptops, and cars, which provides Dutch Bros nearly free advertising. And this is just one example of how it targets its marketing and brand toward younger consumers.
Dutch Bros has a little something for everyone. This is clear from the company's diverse menu, which includes approximately 50% coffee drinks, 25% energy drinks, and 25% other beverages; all are highly customizable with various flavors and modifiers. Coffee drinks alone offer a wide target market for the chain, as the U.S. coffee market is currently around $28 billion and has the potential to reach over $33 billion by 2029. This could be game-changing for Dutch Bros and its investors.
The chain is using its "free" marketing and raising it with an app that works with Dutch Rewards, a loyalty program. The rewards program was used for 65% of all transactions in 2023. And the number of users is increasing -- Dutch Rewards had over 2 million new registrants in the year. It likely led the charge in Dutch Bros's 31% revenue growth as well.
The brand loyalty and love from people I know attracted my attention, and then Dutch Bros' impressive growth plans and core values of quality, speed, and service kept my attention. I've heard many fellow students longing for Dutch Bros because they're no longer near one of its locations.
It sounds like the company could use more stores. However, management seems to already be on it -- Dutch Bros is using a "fortressing strategy" to expand, opening multiple stores in one area to establish brand dominance and market penetration. It had 876 locations as of March 31 and has a goal to significantly increase that number, with 150 to 165 new stores planned for this year and a long-term vision of reaching 4,000 stores. The company is currently at the start of its high-growth phase, which poses a great opportunity.
Dutch Bros has strong growth, customer convenience, brand loyalty, and the ability to attract a wide customer base through diverse customizable drinks. All these factors make it an attractive stock for Gen Z investors seeking a high-growth stock.
