Dollar General is a defensive stock with "multiple ways" to outperform as the likelihood of recession grows, according to Morgan Stanley. Analyst Simeon Gutman upgraded shares of Dollar General to overweight, saying in a Thursday note that the defensive stock with offensive characteristics should get a boost amid greater inflationary pressures. "In a more prolonged downturn, DG should continue to outperform with material earnings and valuation upside. Even if the economy doesn't enter a recession, the business is an earnings compounder," the note read. "DG's margin trajectory is more durable than we appreciated entering the year, and we anticipate a more difficult next 6-12 months for much of Retail given wallet share shifts." Morgan Stanley raised its price target to $250 from $225. The new price target represents 7% upside from Wednesday's closing price. The analyst believes Dollar General could also benefit from a trade down effect, which is on the "cusp of accelerating" as more consumers try to stretch their wallets with a cheaper basket of goods. "Thus there are multiple ways for DG to outperform, and few ways to lose — indeed, the only scenario where DG may be a relative underperformer is if the market rapidly moves to an early cycle 'recovery' environment in which cyclicals outperform," the note read. "We think this is unlikely in the near to medium term, and it's not what our US Equity Strategists are expecting." Shares of Dollar General dipped more than 1% in Thursday premarket trading as the broader market sold off. —CNBC's Michael Bloom contributed to this report.