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1 Great Tech Stock to Own During a Recession

By Matthew Frankel, CFP® and Toby Bordelon – Dec 18, 2021 at 7:21AM

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This tech company has a recurring revenue model and many products consumers and businesses can't do without.

Let's face it: Many of the most popular tech companies in the stock market wouldn't hold up too well during a deep recession. However, Microsoft (MSFT -1.49%) may be another story. In this Fool Live video clip, recorded on Dec. 6, contributor Toby Bordelon explains why. 

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Toby Bordelon: I love this company. I own this company. I actually saw, I was looking for the article, but I couldn't find it. Someone showed it to me just before the show started. There's an analyst out there saying Microsoft is the next $3 trillion company like in the next six months. That seemed aggressive to me, to assume that level of growth in six months. Especially if we get some increased volatility and some market downturn. But it wouldn't be totally shocked, either, I think there's a lot of potential here.

This is another company that's got a lot going on and a lot of different revenue streams. I'm looking here, they are $2.4 trillion today, $2.4 [trillion], $2.5 [trillion] possible. Don't bank on that, though, I would say. You look at everything they're doing, though, the revenue streams are very business focused. We can all think of some consumer aspects of Microsoft. We probably have all use or may use Windows or Windows products at some point in our work. Xbox, very consumer-focused for sure, the gaming part of this company. Even some of their products like the Surface hardware products, many of those have a more consumer-creative focus. Not necessarily corporate.

But a lot of what they do, does fit in that corporate world. You have the Office 365 subscription service which now wraps Office, plus some other products including email into an annual subscription package. We're beyond the days of I go to the store and buy my copy of Office. Most don't do that anymore. Most people will get it via subscription. There's a consumer side to that, too. Then they have Azure, their big cloud computing platform that they use for all things. It backs Office. Many companies use this for cloud computing.

There are so many packages you can get. There are AI [artificial intelligence] packages you can get here, all kinds of stuff. Any type of cloud computing you want to do, Microsoft can be behind that. That's been the fastest growing part of the business. Really at a scale, I think, most people did not expect over the last couple of years. That is what has powered it to this $2-trillion-plus valuation. I think too many people are look at Microsoft and saying: "Oh, Windows is dying. The people, the consumers don't use it anymore." But it's not really a consumer company anymore. Not withstanding the fact that we're very familiar with it. The risks there, of course, if you get a long-term downturn, you might see businesses cutting back on some spend. But even then, I think they might have an advantage.

Remember, we were talking about this about a year ago with Slack before they were acquired by Salesforce (CRM 0.63%). Like, how does Slack compete with Microsoft, who's offering Teams for free. The answer is Teams grew quite a bit, when they packaged it in as an add-on to Office 365. You can say the same thing about something like Zoom (ZM -0.68%). If I have to make a choice, if I have to cut my tech budget and I can get Teams video for free or maybe just a very incremental add-on, that's a compelling offering if my CEO and CFO are telling me you got to cut $5 million out of your budget. Sorry, you just have to do that, find a way. We're talking like big enterprise company, right at that level.

I can see them benefiting because of the way that this model works for some companies who are pulling back. But if you look at that as a risk, given where their revenue comes from, if companies start cutting back, they could see some issues there, but I still love this company. I don't think a market downturn or an economic downturn that doesn't last that long, will actually impact them that much.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Matthew Frankel, CFP® has no position in any of the stocks mentioned. Toby Bordelon owns Microsoft. The Motley Fool owns and recommends Microsoft,, and Zoom Video Communications. The Motley Fool has a disclosure policy.

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