- Netflix has many potential areas for growth.
- Garmin has been successfully growing sales, despite parts of its business declining.
Many investors are concerned about the country falling into a recession within the next couple of years, so they are seeking stocks that are recession buys. Unfortunately, this fear of impending recession is also leading to market instability. Despite some recent unemployment and wage numbers, this worry is preventing any real progress from being made. Those who can extend their time horizons beyond what Wall Street defines as ‘reasonable’ will see greater returns on average. This superpower is more valuable during difficult times like now when short-term concerns dominate headlines.
While a recession may temporarily seem like bad news for investments, it’s not always the case. Many companies do quite well during these periods and emerge even stronger when the economic cycle returns.
Netflix may be ready to regain Wall Street’s favor. The streaming video company’s stock fell sharply throughout 2022 as growth slowed. Competition finally appears to be taking its toll. A surge of popular TV and movie releases seemingly failed to attract new subscribers during the year’s first half.
Don’t write off Netflix just yet. The company aims to return to growth with its upcoming earnings report (on October 18) and has many other promising sales lines to target, including video games and a crackdown on shared password accounts that number into the tens of millions. In addition, just this week, the company announced a new ad-supported service tier they would start offering on November 3.
Netflix is poised to become even more valuable despite tightened entertainment budgets, especially with the upcoming launch of its ad-supported pricing tier. The company has already improved its financial strength, achieving positive cash flow while targeting more years of growth on that key metric.
Garmin may not be the first name that comes to mind when discussing recession-resistant stocks. However, the company has proven it can withstand tough times. For example, smartphones disrupted its core automotive GPS business, but sales have risen yearly for the past six years.
By design, Garmin has increased its product selection rapidly in the last ten years. For example, they added smartwatches and fitness trackers but also expanded their pre-existing airplane and boating navigation selections. So even if Apple (NASDAQ:AAPL) is targeting one of their primary market niches, it won’t impact the growth prediction for Garmin as a whole.
While it is true that Garmin’s growth has slowed down and its profitability is dropping, an economic recession would only exacerbate these problems. However, this company has faced similar challenges previously and always comes out stronger on the other side.
Investors can take advantage of the 40% decline in the stock price to reduce their risk of buying into the stock before a deep recession happens.
No one can predict how the stock market will respond to a recession. However, there are tech stocks that are recession buys. Garmin and Netflix have long track records of success and are likely to weather any economic storms in the next few years.