By Emily Bary
Visa, ServiceNow, MSG Sports and a couple of lottery companies have cracked the Macquarie list
Amid a more dangerous economic backdrop, analysts at Macquarie think stocks including Visa Inc., Planet Fitness Inc., Trade Desk Inc., and lotto operator International Game Technology PLC could show “ basic stability. ”
Within the universe of payments, the Macquarie team is engaged with Visa (V) and Mastercard Inc. (MA), two stocks that “stay in line with current rising volatility” and have previously shown to be “wonderfully resilient through recessions thanks to their size, innovation, and structural tailwinds in digital payments.”
The “structural growth” of card networks could help them stand out in the face of any weakness in volumes, analysts continue.
At Mastercard in particular, they like the company’s positioning in cross-border payments, emerging markets, and newer areas such as digital identity and open banking. For Visa, they note that the company has taken “proactive steps” in cryptocurrency that “could help close the proportional gap in developing-market exposure to rival Mastercard and Visa’s position to benefit from greater participation. in the economy in weak money markets. ”
Within the leisure sector, analysts see promise of a newer name that was not public during the last economic downturn. Planet Fitness (PLNT) can continue to offer an attractive value proposition for consumers, in their right mind, by attracting people looking to “trade down” from more expensive gyms, as well as exits that are “too cheap to cancel” for current members.
“The store unit economy is back to historic levels, and demand at every existing location is accelerating, highlighting the runway ahead for new unit growth,” they wrote. “The company has a lot of domestic and international franchising ahead in our view, and a consumer value proposition if macro sentiment worsens ($ 10/month base membership, $ 24.99/month for Black Card members).”
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 substantial contract revenue from sports media rights, and we argue that the legacy of its teams, not to mention the largest market, should drive and hold value through the wider market turmoil, ” They said.
Software selections include ServiceNow Inc. (NOW), Atlassian Corp. PLC (TEAM), Instructure Holdings Inc. (INST), and VMware Inc. (VMW), based on the assumption “best-of-breed software-as-a Service companies (‘ SaaS ’) can provide shareholders with solid cash-flow-generative assets supported by sticky enterprise customer base. ”
ServiceNow has a “large global enterprise customer base” that “provides ample cross-sell and up-sell opportunities, which can support growth even in a bad market environment,” while Atlassian has a strong model of self-service sales that allows it to limit marketing spending, analysts wrote. Admittedly, Atlassian has “somewhat higher exposure to small to medium -sized businesses,” but Macquarie’s team said the company showed at the start of the pandemic that it could withstand events forcing smaller business.
As for Instructure, analysts note that the company provides educational customer service in the higher education and K-12 markets. “We want Instructure’s positioning as the market share leader in the learning management system (‘ LMS ’) market for higher education institutions in the US, which we believe has a strong customer base similar to corporate enterprises,” they wrote. .
VMware promised “because of the upcoming tailwinds from its transition to a SaaS model (vs. perpetual license), sticky customer base, and implicit put options from the recently announced acquisition of Broadcom (AVGO),” they continued .
Analysts are also betting that consumers will still play the lottery in tough times, noting that the lottery business was “resilient” to the last financial crisis and the onset of the pandemic, while businesses operating in This industry has relationships.
“In our view, the lottery industry is a remarkably stable and consistent business, showing consistent growth through the economic cycle,” the analysts wrote, featuring International Game Technology PLC (IGT ) and NeoGames SA (NGMS).
Gaming companies may take too long, which analysts have called Penn National Gaming (PENN), MGM Resorts International (MGM), and Caesars Entertainment Inc. (CZR) as favorite pick.
Additionally, they see potential in ad-technology companies Applovin Corp. (APP), The Trade Desk (TTD), and IronSource Ltd. (IS), citing “their relative stability through targeted marketing, secular growth in mobile and connected TV, and low cost.”
-Emily Bary
(END) Dow Jones Newswires
06-24-22 0822ET
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