1 tech stock to buy in a recession and 1 to avoid

Despite a slowdown in the aggressiveness of the Fed's rate hike, the likelihood of a recession is still widespread. However, given the high demand for technology products and services, the outlook for the industry looks promising. Therefore, investors could buy quality Salesforce (CRM) technology stocks regardless of a recession. However, fundamentally weak BlackBerrys (BB) may be best avoided. Keep reading….

Despite a slowdown in federal rate hikes and growing hopes that the economy will escape a recession, according to the New York Fed's Recession Probability Model, the odds of a recession over the next 12 months are 57%.

However, the tech giants seem undeterred and are preparing for any downturn that may come. Dana Peterson, Conference Board Chief Economist, said, "They plan to mitigate risk by accelerating innovation and digital transformation, seeking new opportunities in higher-growth markets, and revising business models, the three most cited actions."

Furthermore, amid a growing market for emerging technologies like artificial intelligence, the outlook for the tech industry is bright. The global AI solutions market is expected to grow at a CAGR of 29.4% through 2028.

Tech stocks were under pressure last year due to macroeconomic issues. While investors may buy quality tech stock Salesforce, Inc. (CRM), despite lingering recession concerns, fundamentally weak BlackBerry Limited (BB) is best avoided.

Stock to buy:

Salesforce, Inc. (CRM)

CRM provides customer relationship management technology that brings businesses and customers together around the world.

CRM's forecast Price/Book of 2.74x is 31.9% below the industry average of 4.03x.

Its gross profit margin of 72.69% over the last 12 months is 47.8% higher than the industry average of 49.18%. Its leveraged trailing 12-month FCF margin of 30.62% is 353.7% higher than the industry average of 6.75%.

CRM's total revenue increased 14.2% year-on-year to $7.84 billion for the third quarter ended October 31, 2022. Additionally, its gross profit was $5.75 billion, an increase of 14.5% year-over-year. year. Its operating revenue was $460 million, up 1,110.5% year-over-year.

Analysts expect CRM revenue to grow 16.9% year-over-year to $30.97 billion in the current fiscal year, 2023. Its EPS is expected to increase 18.3% per year over the next five years. It has exceeded EPS estimates for the past four quarters. CRM shares have gained 21.9% year-to-date to close the last trading session at $161.62.

CRM's strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which translates to a buy in our proprietary rating system. POWR ratings rate stocks on 118 different factors, each with its own weighting.

CRM has an A rating for growth and a B rating for sentiment. In the Software - Applications industry, it is ranked No. 26 out of 137 stocks. Click here for additional POWR ratings for Value, Momentum, Stability and Quality for CRM.

Stock to Avoid:

BlackBerry Limited (BB)

Located in Waterloo, Canada, BB provides intelligent security software and services to businesses and governments around the world. The Company operates through three segments: Cybersecurity; IoT; Licenses and others.

BB's EV/Forward Sales of 3.61x is 22% higher than the industry average of 2.96x. Its price/forward sales of 3.57x is 23.7% above the industry average of 2.89x.

BB's negative trailing 12-month EBITDA and net profit margins of 13.19% and 13.77% are below industry averages of 11.28% and 2.89%.

BB revenue was $169 million for the three months ended November 30, 2022, down 8.2% year-over-year. Its adjusted EBITDA was negative $22 million, compared to negative $8 million a year ago. Additionally, its gross margin decreased 6.8% year-over-year to $109 million.

Street expects BB to re...