Millennials and Gen Z are the most tech-savvy generations in history, and that trait is highly relevant to these groups’ discretionary spending habits.
With that in mind, there are myriad investment implications, some of which could signal opportunity with exchange traded funds such as the ARK Next Generation Internet ETF (ARKW). The actively managed ARKW is a broad-based play on various emerging internet themes, and while it’s not a dedicated consumer discretionary ETF, it is a viable avenue for investors looking to tap into how the aforementioned generations shop and invest.
For example, ARKW’s 6.57% allocation to Shopify (NYSE: SHOP) is pertinent because while brick-and-mortar retail stores are experiencing a renaissance of sorts, Millennials and Gen Z are comfortable shopping online.
A recent survey by ESW indicated that more than a quarter of Millennials are expecting to boost online retail spending this year while trimming their expenditures in physical stores. The survey also indicated that 73% of Millennials polled expect to spend more online this year, or at least the same as what they doled out in 2022.
“It’s a noteworthy update for analysts searching for a winner in the pandemic-era tug of war between brick-and-mortar stores and online shopping. While the early part of the pandemic saw an unprecedented online shopping boom, in-person shopping has been ready for a resurgence, as eager shoppers return to newly reopened brick-and-mortar stores,” reported Natasha Piñon for CNBC.
Beyond shopping, Millennials and Gen Z are big fans of online gaming and wagering — themes that ARKW taps into with a more than 10% combined weight to Roblox (NYSE: RBLX) and DraftKings (NASDAQ: DKNG) — the ninth- and tenth-largest holdings in the ETF, respectively.
Specific to DraftKings, the online sportsbook giant already issued impressive 2023 revenue guidance while forecasting a smaller-than-expected loss for this year, stoking hopes that the money-losing betting firm could be on pace to turn profitable at some point in 2024.
Integral to the DraftKings story is the operator’s efforts to better control spending, both on staff count and promotional expenditures. Analysts view the latter as pivotal to the company’s fortunes in terms of profitability. DraftKings is also boosting its use of technology in an effort to better identify sharp sports bettors and small timers that are simply signing up for lavish bonuses. Clients in the latter category usually aren’t “sticky” and have penchants for departing when their accounts are depleted.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.