In a more precarious economic environment, Macquarie analysts think that stocks like Visa Inc., Planet Fitness Inc., Trade Desk Inc. and lottery operator International Game Technology PLC could demonstrate “fundamental resilience”.
Within the world of payments, Macquarie’s team is gravitating towards Visa V,
and Mastercard Inc. MA,
two actions that “have kept the line through the current increase in volatility” and have previously proven to be “incredibly resilient to recessions thanks to their scale, innovation, and subsequent structural winds in digital payments”.
The “structural growth” of card networks could help keep them afloat in any weakness in volumes, analysts continued.
Specifically, Mastercard likes the company’s positioning in cross-border payments, emerging markets and newer areas such as digital identity and open banking. For Visa, they point out that the company has taken “proactive measures” on cryptocurrency that “could help close the proportional gap in exposure to the developing market with rival Mastercard and position Visa to benefit from greater economic participation in weak currency markets “.
Within the leisure sector, analysts see promising a newer name that was not public at the time of the last economic crisis. Planet Fitness PLNT,
it could continue to offer an attractive value proposition to consumers, they reason, appealing to people looking to “reduce” the most expensive gyms, as well as seeming “too cheap to cancel” for current members.
“The economy of store units has returned to historic levels and demand for existing location is accelerating, highlighting the track for the growth of new units,” they wrote. “In our opinion, the company has many national and international franchises ahead of it, and a value proposition for the consumer if macro sentiment deteriorates (base membership $ 10 a month, $ 24, $ 99 a month for members of the Black Card). “
Madison Square Garden Sports Corp. MSGS,
which manages the New York Knicks and Rangers, could be another leisure play, according to analysts. The company “has significant contracted revenue from sports media rights, and we argue that the legacy of its equipment, not to mention the larger market, should generate and maintain value through broader market turmoil.” said.
Software options include ServiceNow Inc. NOW,
Atlassian Corp. PLC TEAM
Instructure Holdings Inc. INST,
and VMware Inc. VMW,
based on the assumption that “better quality software as a service (‘SaaS’) companies can offer solid active shareholders cash flow generators that are supported by stuck business customer bases.”
ServiceNow has a “substantial global business customer base” that “offers broad cross-selling and additional sales opportunities, which can support growth even in adverse market environments,” while Atlassian has a sales model of strong self-service that allows you to limit marketing. spending, analysts wrote. It’s true that Atlassian has “relatively higher exposure to small and medium-sized businesses,” but Macquarie’s team says the company demonstrated at the start of the pandemic that it could withstand events that put pressure on smaller businesses.
As for Instructure, analysts point out that the company serves educational clients in the higher education and K-12 markets. “We like the positioning of Instructure as a market share leader in the market for learning management system (‘ LMS ’) for US higher education institutions, which we believe are a stable customer base similar to corporate companies, ”they wrote.
VMware makes the promise ”due to the upcoming subsequent winds of its transition to a SaaS model (compared to a perpetual license), a sticky customer base, and an implicit sale option from the recently announced acquisition by Broadcom AVGO,
Analysts also bet that consumers will still play the lottery in difficult times, noting that the lottery business was “resilient” in the last financial crisis and at the start of the pandemic, while companies operating in this industry has deep-rooted relationships.
“From our point of view, the lottery industry is a remarkably stable and consistent business, showing steady growth during the business cycle,” analysts wrote, highlighting International Game Technology PLC IGT,
and NeoGames SA NGMS,
Gaming companies could also hold out, with analysts calling Penn National Gaming PENN,
MGM Resorts International MGM,
and Caesars Entertainment Inc. CZR,
as preferred elections.
In addition, they see potential in advertising technology companies Applovin Corp. APP,
The Trade Desk TTD,
and IronSource Ltd. IS,
citing “its relative resilience through targeted marketing, the secular growth of mobile and connected television, and low valuation.”