The TSX Composite Index, Nasdaq Composite Index, and the S&P 500 Index are in the red as weaker-than-expected U.S. jobs data for August 2024 has increased fears of a recession. Here are three stocks whose stock price fell over fears of a recession. While a recession can impact their earnings, they have the financial flexibility to recover quickly and return to the long-term secular trend.
Hive Digital Technologies
Hive Digital Technologies (TSXV:HIVE) stock has dipped 26% in the last two weeks to below $4 over fears of a recession. Hive’s main source of revenue comes from mining Bitcoin. On April 20, mining rewards halved (halve occurs every 210,000 blocks), reducing the Bitcoin available to miners per day from 900 to 450. The halving slowed Hive’s revenue, but it benefited from a higher average Bitcoin price in the second quarter. The company’s stock price is influenced by Bitcoin prices, which in turn is influenced by investor confidence. The fear of a recession has reduced investors’ confidence and put them in a sell mode.
However, Hive’s fundamentals remain strong. The company has ventured into the high-performance computing (HPC) business, where it rents out graphic processing unit (GPU) computing power on demand to help small companies perform HPC, artificial intelligence (AI) and rendering workloads. It also rents out a full server to companies that do not want to share in the cloud. In the June 30, 2024, quarter, Hive’s revenue from HPC business reached $2.6 million.
I am bullish on the stock as it enjoys a secular trend of AI and has an edge in Bitcoin price fluctuation. The stock could double your money in a strong economy. The AI adoption could gradually increase HPC business and generate stable long-term growth. Moreover, Bitcoin price fluctuation could create cycles of windfall gains.
goeasy stock
goeasy (TSX: GSY) stock has been falling since August as fears of a recession made investors wary about the subprime lender. A recession raises credit risk, and goeasy is dealing with sub-prime lenders that carry higher risk. Hence, it is natural for the stock price to fall. Moreover, the lender saw a 33% increase in bad debts to $112 million in the second quarter.
However, goeasy has been strengthening its model and expects loans receivables and operating margin to grow steadily in the coming three years. It has increased its provisions for bad debt to $94 million, which is 9.3% of the total loan book and within the target range of 8-10%.
While there is a risk, there is also significant growth opportunity. goeasy has been expanding its business by growing its credit products portfolio, expanding its distribution channels, diversifying its geographic footprint and improving a customer’s financial wellness. It has been successfully growing its portfolio, driving the stock price up 47% in the last 12 months of a high-interest environment.
While goeasy stock could fall further in the short term, it has the potential to grow your money by double digits in the mid- to long term.
Nvidia stock
Nvidia (NASDAQ: NVDA) is a stock to buy and hold. While it is overvalued, the current dip has brought some correction, and US$100 is an attractive price point. The generative AI frenzy may die down, but Nvidia has more on its portfolio. AI at the edge, rendering, high-performance computing, and self-driving cars. Whether it is metaverse or crypto mining, training the models or professional visualization, all these tasks require graphic processing unit computing, and Nvidia is unbeaten here.
There will come a time when there will be a cyclical downturn as its revenue depends on companies’ technology budgets. However, there are also tech upgrades every few years. Nvidia’s asset-light model and a boatload of cash give it ample flexibility to continue making advanced chips and an entire infrastructure from hardware to application and usability.
This is a stock to buy and hold at each dip. It has the potential to triple or quadruple your money in five to seven years.
