Defensive revenue refers to the revenue generated by a company that is considered to be relatively stable and resistant to economic downturns. It is a type of revenue that is considered “recession-proof” because it is not heavily dependent on the overall state of the economy.
Examples of defensive revenue include essential goods and services such as utilities, healthcare, and food. Companies that provide these goods and services are likely to see relatively stable demand for their products and services, even during a recession. This stability is because these goods and services are considered essential and people will continue to use them regardless of the economic conditions.
For example, a utility company that provides electricity or gas is considered to have defensive revenue because people will continue to use electricity and gas regardless of the state of the economy. Similarly, a healthcare company that provides necessary medical treatments will also be considered to have defensive revenue as people will continue to require medical treatments regardless of the state of the economy.
Investors often seek out companies with defensive revenue when they are concerned about economic uncertainty, as these companies are considered to be less risky than companies that rely on discretionary spending. However, it’s important to note that no revenue is completely immune to economic downturns and a company with defensive revenue may still see a decline in its revenue during a recession.
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