Feirre wrote a post · Jan 18, 2023 15:35

Costco, Microsoft Are Stocks Fit For Recession: Goldman Sachs

Many economists and investors believe the Federal Reserve’s interest-rate increases will produce a hard landing for the economy – a recession.

Economists at Goldman Sachs predict a soft landing. But if there is a hard landing, they expect $S&P 500 Index (.SPX.US)$ to fall to 3,150, a 21% drop from the recent level of 3,988.

With that in mind, $Goldman Sachs (GS.US)$ strategists put together a list that should benefit from a hard landing.

Costco, Microsoft Are Stocks Fit For Recession: Goldman Sachs

$Costco (COST.US)$ : $Morningstar (MORN.US)$ analyst Zain Akbari assigns the company a wide moat (durable competitive advantage) and puts fair value for the stock at $476. It recently traded at $487.

* “With a besotted member base, low-frills warehouses, and growth opportunities at home and abroad, we expect Costco’s durable competitive advantages to lead to consistent, strong performance despite retail’s upheaval.”

* “The competitive environment is intense and becoming more challenging…, but we believe the values that Costco offers (driven by cost leverage, procurement strength, and top-class store efficiency) should allow it to keep traffic high.”

But he warned against buying at the stock’s current lofty level.

$Microsoft (MSFT.US)$ : Morningstar analyst Dan Romanoff gives the company a wide moat and puts fair value for the stock at $320. It recently traded at $239.

* “Microsoft reported solid fiscal first-quarter 2023 results [in October], including revenue and [profit] results ahead of the guidance midpoints.”

* “The outlook, however, was worse than our below-consensus model was contemplating. Macro pressures continue to weigh on the company’s performance.”

* But, “we continue to find encouragement in Azure [Microsoft’s cloud offering], Office E5 migration, and traction with the Power platform for long-term value creation,” Romanoff said. To be sure, “near-term pressures will not be exhausted within the next quarter.”

Still, “it is premature to say the Azure growth story is over despite the slowdown,” he said