The COVID-19 recession was abrupt and painful, but many tech companies weathered the storm as stay-at-home measures, remote work, and online education drove demand for their products and services…
However, many tech stocks are now declining as investors pivot toward value stocks and reopening plays as bond yields and vaccination rates rise. High-growth tech companies that relied heavily on pandemic-specific tailwinds, like Zoom Video Communications, are starting to lose their luster.
Faced with these challenges, investors must be more selective with tech stocks. Specifically, they should focus on evergreen tech giants that are resistant to the next recession which will more likely be caused by traditional macroeconomic challenges instead of another global pandemic.
Salesforce, the world’s largest provider of cloud-based customer relationship management (CRM) services, has already weathered two major recessions since its IPO in 2004.
Salesforce’s stock price has risen nearly 8,000% since its public debut and rallied about 50% over the past 12 months as demand for its services — which also include cloud-based sales, marketing, and analytics tools — remained robust throughout the pandemic.
Salesforce’s revenue rose 24% to $21.25 billion in fiscal 2021, which ended this January, as its adjusted earnings grew 65%. It also reiterated its target of more than doubling its annual revenue to over $50 billion by fiscal 2026.
Salesforce is setting such confident long-term forecasts because companies will continue to streamline their sales teams, digitize their operations, and rely more on data-driven decisions to cut costs, improve their efficiency, and reduce their dependence on human employees for repetitive tasks.
Those secular trends could accelerate through economic downturns. Salesforce’s near-term earnings growth will be squeezed by its planned takeover and integration of Slack, but its stock still looks reasonably valued at just over 50 times forward earnings and less than eight times this year’s sales.
2. Palo Alto Networks
The cybersecurity sector is an evergreen market. In fact, cyberattacks often intensify during recessions as hackers, companies, and state-backed organizations resort to new ways to steal money and secrets.
Escalating tensions between the U.S., China, and other countries — which drove President Biden to designate cybersecurity as a “top priority” for his administration — should enable top-tier cybersecurity companies to…
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