With US equities hovering near record levels and economics indicators flashing warning signs – Morgan Stanley is urging investors to seek shelter in companies with robust free cash flows.
According to the investment firm, “cash-rich” businesses are better equipped to navigate volatility, thanks to their ability to self-finance operations and growth.
Amid rising unemployment and downward revisions to job creation, the appeal of these companies has grown.
Morgan Stanley has screened the Russell 1000 for names with strong cash-to-enterprise values and double-digit free cash flow growth projection. Among its top picks: DoorDash, Spotify, and FedEx.
FedEx Corp (NYSE: FDX)
FedEx stands out as a logistics heavyweight with a healthy cash cushion. Morgan Stanley expects its free cash flow to grow 31.4% in 2025 and another 14.9% in 2026.
Despite mixed earnings in the second quarter, the company’s financial flexibility remains intact, bolstered by its plan to spin off its freight division.
This strategic move could unlock operational efficiencies and sharpen focus on core delivery services.
FedEx’s ability to generate substantial cash even in a challenging macro environment makes it a compelling defensive play.
As Morgan Stanley noted, “companies with ample free-cash flow are self-financing,” and FedEx stock fits that bill.
FDX shares also currently pay a dividend yield of 2.51% – which makes them even more attractive to own for the longer term.
Spotify Inc (NYSE: SPOT)
Spotify continues to impress with its expanding user base and improving monetization.
The audio-streaming giant is projected to grow free cash flow by 27.6% in 2025 and 34.3% in 2026, as per Morgan Stanley.
The company’s second-quarter revenue rose 10% year-over-year, driven by premium subscriptions and advertising gains.
SPOT’s ability to convert top-line growth into meaningful cash reserves gives it a buffer against economic headwinds.
The firm’s scalable model and disciplined cost structure make it one of the most attractive names in the digital media space.
Other Wall Street firms agree with Morgan Stanley’s constructive view on SPOT shares, given the consensus rating on the music streaming app currently sits at “overweight”.
DoorDash Inc (NASDAQ: DASH)
DoorDash shares have emerged as a cash-generating force in the on-demand economy.
Morgan Stanley forecasts free cash flow growth of 26.6% this year and a striking 41.5% in 2026.
The company posted $3.3 billion in revenue for second quarter of 2025, up 25% on a year-over-year basis, fuelled by strong demand and rising DashPass subscriptions.
Despite competition from Uber Eats and others, DASH’s expanding margins and efficient capital allocation have helped it build a sizable war chest.
In a downturn, its cash-rich profile could be a key differentiator.
Note that Wall Street currently has a consensus “overweight” rating on DASH stock – with a mean target of about $297, indicating potential upside of nearly 20% from here.
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