Skip to content

2 stocks not to buy during a recession

2 stocks not to buy during a recession
Dino Kurbegovic

The economic outlook is currently clouded with uncertainties, with the lingering pandemic, Russian invasion of Ukraine, and lockdowns in China. Meanwhile, in the U.S., the Federal Reserve (Fed) is raising interest rates to fight off inflation. 

With such a backdrop, a global recession seems imminent, and according to a survey conducted between March 29 to April 1, by Bloomberg Markets Live, 48% of investors expect the U.S. to fall into a recession in 2023.

There have been 11 recessions in the U.S. throughout history, the first one was in 1953, and on average, the S&P 500 index fell 2.1%; however, in the 2020 recession the index fell 11.2%, and now in 2022 it fell more than 12%.

As a recession seems more likely, Finbold has identified two stocks that should not be bought in the near to medium term due to the risk of poor performance. 

Boeing (NYSE: BA

Shares of Boeing lost over 8% in the trading session on June 13, as investors are pricing in a recession and bailing from the stock, possibly indicating that it will not be a safe haven stock.

Historically, BA was a bad investment during a recession, since the company builds airplanes, which are big-ticket items, with airlines switching to survival mode during recessions and not expansion mode. 

In summary, the need to buy new airplanes will decline during a recession. This news comes at a challenging time for the company since in more recent times it has been riddled with difficulties such as the plane crash in China as well as renewed Covid lockdowns. Meanwhile, the company’s debt has swelled over 400% in the past five years, meaning that a lot of demand will be required for the firm to thrive. 

Moreover, the shares of the company are now in a downward trend, trading below all daily Simple Moving Averages (SMAs). Slight trading volume increases have been noted in May, which led to a sell-off as shares are now as low as they have been during the initial days of the Covid sell-off.

BA 20-50-200 SMA lines chart. Source. Finviz.com data. See more stocks here.

On the other hand, analysts on Wall Street rate the shares a strong buy, predicting that in the next 12 months the average price may reach $214.33, which is 84.99% higher than the current trading price of $115.86.

Wall Street BA analysts’ price targets for BA. Source: TipRanks

Uber (NYSE: UBER)

With the stock price down over 45% year-to-date (YTD) they may look enticing; however, the company’s three business segments seem vulnerable to inflation and recession. Namely, rising gas prices and lowered spending power of consumers can lead to people opting for cheaper alternatives.

During Covid lockdowns, the Uber Eats segment grew to now account for 48% of the company’s revenue, while the freight segment makes up roughly 12% of the revenue. Furthermore, the Mobility segment, 40% of revenue, is usually discretionary since most of the traffic occurs at night when people are socializing in bars and are looking to return home safely. Thus, there is a possibility that all of these segments, especially the last one might suffer if people decide that belt-tightening is needed to weather the recession. 

Similar to BA, UBER shares are in a downtrend, trading below all daily SMAs. Noticeable trading volume increases during May and June have led to a further sell-off in the stock as shares are close to their all-time lows. 

UBER 20-50-200 SMA lines chart. Source. Finviz.com data. See more stocks here.

Conversely, analysts rate the shares a strong buy, predicting that the average next 12 months price could reach $48.85, which is 126.47% higher than the current trading price of $21.57.

Wall Street UBER analysts’ price targets for UBER. Source: TipRanks

All in all, during a recession market participants, could do well if they focus on companies with strong cash flows, earnings, and no scandals. 

Further, strong competitive moats and cash on hand can help companies weather the storm of inflation and recession for the benefit of their business and their shareholders. 

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

Best Crypto Exchange for Intermediate Traders and Investors

  • Invest in cryptocurrencies and 3,000+ other assets including stocks and precious metals.

  • 0% commission on stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

  • Copy top-performing traders in real time, automatically.

  • eToro USA is registered with FINRA for securities trading.

30+ million Users
Securities trading offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Finbold.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD

Read Next:

Finance Digest

By subscribing you agree with Finbold T&C’s & Privacy Policy

Related posts

Sign Up

or

By submitting my information, I agree to the Privacy Policy and Terms of Service.

Already have an account? Sign In

Services

IMPORTANT NOTICE

Finbold is a news and information website. This Site may contain sponsored content, advertisements, and third-party materials, for which Finbold expressly disclaims any liability.

RISK WARNING: Cryptocurrencies are high-risk investments and you should not expect to be protected if something goes wrong. Don’t invest unless you’re prepared to lose all the money you invest. (Click here to learn more about cryptocurrency risks.)

By accessing this Site, you acknowledge that you understand these risks and that Finbold bears no responsibility for any losses, damages, or consequences resulting from your use of the Site or reliance on its content. Click here to learn more.