Investors are selling out of fear as the economy begins to look shaky. In the United States, 3,500 exchange-listed stocks experienced 52-week lows last week. Many of the losses are justified, but several of these businesses have resilient business structures.
Despite reaching new lows, Groupon (GRPN 1.38%) and Roku (ROKU 5.60%) both possess qualities that make them recession-proof, which the market appears to be underestimating. Let’s discuss the reasons why they could recover from the most recent sell-off.
Your initial reaction upon seeing Groupon on this list may be to question the continued relevance of the flash-sale specialist. Fair enough. For the sixth consecutive year, revenue has decreased. When we were at our 2014 Groupon peak, our trailing revenue was 76% lower. The local discounter operator has had a difficult few years as it pulls back from overseas markets and the low-margin physical goods sector that supported top-line results. The good news is that pre-tax profits last year saw the highest performance since 2012, which is good news for the bottom line.
We now come to the recession, which many economists believe to be either already here or imminent. When the last recession hit, Groupon was only in its infancy, but the setback caused by the financial and banking crises helped the platform’s popularity soar. When money is tight, consumers seek discounts. Local companies desire leads. By acting as the magical intermediary and collecting a significant cut of the sale, Groupon satisfies both demands. There is no better moment than now for a return to the fundamentals.
Roku isn’t your typical marketer magnet, which may surprise you to see it on this list of companies financed by advertisements. The most popular operating system for streaming media through your TV is run by Roku, and it’s expanding. It now hosts 63.1 million active accounts, which is 14% more households than it did a year ago.
However, there are several causes for concern in this situation. When the economy weakens, advertisers frequently cut back on their spending. Supply chain issues have caused Roku itself problems and are affecting its low-margin hardware segment. Bulls were already uneasy due to its projection for the most recent quarter, which called for a mere 3% increase in sales year over year.
But let’s now discuss what may occur during a recession. The Roku platform is well-liked. In a downturn, marketers may be more cautious generally, but the majority of Roku’s advertisers are streaming video providers that want to stand out among the hub’s hundreds of other applications. To survive the impending shakeout, they will need to advertise on the largest streaming video service. Both usage and revenue will continue to increase.