After many legal disputes, the dispute over the waiver of the student loan seems to be over. And that news has put three future-sale stocks squarely in the firing line.
From today’s perspective, it looks as if student loans will start earning interest again from September. Payments are due again from October. After a three-year moratorium on payments due to the disruption to the economy caused by COVID-19, the return of those payments could have a significant impact on the economy, particularly for millennial and Gen Z-focused businesses.
Some analysts suspect that this could trigger a stock market and real estate market crash. That’s entirely possible, depending on how the chips fall. In any case, it’s very likely that these three stocks to sell will be hit hard once student loan payments get back on track.
Robinhood (HOOD)
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Robinhood Markets (NYSE:HOOD) could be the epicenter of the upcoming shock of this change.
That’s because younger users love Robinhood. The user-friendly app and the comprehensible way of conveying investment attractiveness to many customers. Robinhood also makes it easy to fund small accounts, while many brokers have stricter restrictions on opening new accounts. Combined with clever marketing tactics like giving new users a free share of a random share, Robinhood took off in the early 2020s.
This fitted in perfectly with the student loan moratorium. A recent Wall Street Journal report noted that it was a surprisingly high reading 57% of people between the ages of 18 and 25 have at least one investment. Much of this was likely funded with funds that would otherwise have been used to pay off educational debt.
Robinhood already has a lot of problems. Shares are trading well below their all-time highs as the company continues to lose money. Efforts to expand the business into things like retirement accounts haven’t impacted overall profitability. And the loss of many younger traders could be the last drop for HOOD stock. It’s definitely worth considering adding HOOD to your list of stocks for sale before payments resume.
Coinbase (COIN)
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The Wall Street Journal article also pointed out that cryptocurrency is another beneficiary of the student loan payment moratorium. And it makes intuitive sense. Unexpected meme games like Dogecoin (DOGE USD) picked up steam in 2021, just as young people were enjoying government aid checks and student loan breaks.
In the meantime, however, the mood has changed. Inflation has hit younger consumers hard. The aid checks have long since expired. And now the college bill is due, too. All of this speaks to a customer base Coinbase (NASDAQ:COIN), who is likely to have less cash left over to spend on new, hot cryptocurrencies.
And even if the cryptocurrency picks up again, it’s unclear whether Coinbase can benefit in any big way. This is because the government is cracking down on more speculative tokens, yield farming, unregistered cryptos, etc. All of this makes crypto investing less attractive, especially at a time when consumers are having to tighten their belts to cope with student loan payments.
Dutch Bros (BROS)
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Dutch Bros (NYSE:BROS) is a café aimed at younger consumers. The management has recognized that Starbucks (NASDAQ:SEX) appealed to more millennial customers and younger customers were looking for a different experience.
Dutch Bros.’ formula of small stores focused on drive-thru and higher sugar beverages with unique flavors has made the company a winner. Sales skyrocketed and the company had a successful IPO.
However, inflation and a potentially weakening economy could hit Dutch Bros. The company’s performance has slowed, with Dutch Bros posting a rather subdued 3.8% growth in same-store sales in its most recent quarter. That’s barely keeping up with inflation and speaks to a potentially tapped customer base.
Dutch Bros continues to grow its sales at a rapid pace, but this is largely due to the rapid opening of new stores. This could cause problems if the economy hits a recession, especially if younger consumers are struggling. The impending resumption of student loan payments will likely divert a significant portion of people’s disposable income from recreational items like coffee to paying off debt. That could hit BROS stock hard.
At the time of publication, Ian Bezek had no direct or indirect position in any of the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publication guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a junior analyst for Kerrisdale Capital, a $300 million hedge fund based in New York City. You can reach him on Twitter at @irbezek.
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