Get those birthday candles lit and on the cake! Exactly 126 years ago today, the Dow Jones Industrial Average (DJINDICES: ^DJI) made its debut as a 12-stock index comprised predominantly of (surprise) industrial companies. Since then, it’s transformed into a widely followed 30-component index packed with successful, multinational businesses.
Although Dow Jones stocks are often viewed as mature (i.e., relatively slow-growing) companies, select analysts on Wall Street see significant upside potential in a handful of names — especially with the Nasdaq Composite and S&P 500 both hitting bear market territory.
Based on a number of high-water price targets from Wall Street, the following three Dow stocks offer upside ranging from 107% to 147% over the next 12 months.
Salesforce: Implied upside of 107%
The first Dow Jones stock that has the potential to more than double investors’ money, at least according to one analyst, is cloud-based customer relationship management (CRM) software solutions provider Salesforce.com (NYSE: CRM).
According to analyst Brent Bracelin of Piper Sandler, Salesforce can reach $330 a share, which would mark a 107% increase from where the company’s stock ended last week. Bracelin was impressed with the demand for Salesforce’s CRM solutions exiting the fourth quarter, and believes it’s one of the least expensive large-cap cloud stocks among those he and his company cover.
CRM software is used by consumer-facing businesses to enhance existing customer relationships and boost sales. It helps companies with online marketing campaigns, can be used to run predictive sales analyses to determine which clients might purchase a new product or service, and is helpful in overseeing product and service issues.
Salesforce is the undisputed kingpin of the CRM arena. Based on a recently released report from IDC, Salesforce accounted for 23.8% of global CRM spending last year. This marked the company’s ninth consecutive year as the top dog in CRM. More importantly, the company’s 23.8% share is more than 2 percentage points higher than the shares of Nos. 2 through 5, combined. It’s unlikely to be dethroned anytime soon.
What’s more, Salesforce is growing at a significantly faster rate than the CRM software industry as a whole. Aside from its leading market share, acquisitions are playing a critical role. CEO Marc Benioff has overseen a number of earnings accretive deals, including MuleSoft, Tableau Software, and Slack Technologies. These acquisitions allow the company to cross-sell on new platforms in order to grow its ecosystem.
Although it’s tough to see Salesforce outperforming in an environment with such negative investor sentiment, I do believe $330 is a very realistic price target at some point in the future.
Walt Disney: Implied upside of 124%
Another Dow stock with jaw-dropping upside potential over the next 12 months, according to Wall Street, is the House of Mouse, Walt Disney (NYSE: DIS).
The high-water price target of $229 on shares of Disney belongs to Ivan Feinseth of Tigress Financial. In Feinseth’s view, new theme park attractions, higher in-park spending, park reservation optimization, and growth in Disney+ streaming are all reasons shares could rally 124% from where they ended this past week.
On one hand, hitting $229 is going to come with its fair share of headwinds. Walt Disney continues to be weighed down by international park closures due to COVID-19. Additionally, the company’s streaming segment has lost nearly twice as much through the first six months of fiscal 2022 ($1.48 billion) relative to the same period last year. Everything from higher programming and production costs to marketing expenses have weighed on this direct-to-consumer segment.
On the other hand, Walt Disney has a slew of competitive advantages working in its favor that could make $229 an eventual reality (but probably not within the next 12 months). For instance, few companies have been able to successfully transcend generational gaps quite like Disney. It’s why the company’s theme parks are so attractive, and perfectly explains how the Disney+ streaming service was able to sign up 137.7 million people in just 2 1/2 years. It took Netflix more than 10 years to reach a comparable number of streaming subscribers.
Walt Disney is also pretty well insulated from the effects of inflation. Even though inflation is historically high, families aren’t going to theme parks with the expectation of doing things cheap. Disney has been handily outpacing the prevailing inflation rate with its admission prices for decades — and consumers have been willingly supporting those inflated prices.
But it’s Disney’s innovation that’s the real secret sauce. From the company’s extensive movie library to its newly introduced Genie+ service, which allows park-goers to expedite their access to certain attractions, Disney has a knack for driving revenue into its coffers.
Boeing: Implied upside of 147%
However, the crème de la crème of upside opportunity in the Dow, at least among to this group of stocks, belongs to commercial and military aircraft developer and manufacturer Boeing (NYSE: BA).
The peak price target on Wall Street comes from Richard Safran of Seaport Global. Per Safran, Boeing has the ability to hit $298 a share once it gets beyond a number of headwinds, including the pandemic and issues with the 737 MAX and 787 Dreamliner. At $298, Boeing would offer its shareholders 147% upside, relative to where the stock closed this past Friday.
The biggest hurdle between Boeing and a nearly $300 share price is going to be its commercial aircraft division, which has been hit with one setback after another. The company’s 737 MAX was grounded for roughly two years due to safety and electrical concerns, but is currently back in the air.
Making matters worse, 787 Dreamliner deliveries have been put on hold for the past year as the U.S. Federal Aviation Administration (FAA) investigates inspection methods and manufacturing processes used on the Dreamliner. Though Boeing had previously suggested the 787 would receive certification that would lead to deliveries in the latter half of 2022, the FAA recently identified omissions in Boeing’s documentation that could further delay 787 deliveries. Between these delays, rapidly rising inflation, and COVID-19-related supply chain challenges, Boeing has reported uncharacteristically large losses.
But there’s another side to the coin. Despite a flurry of unrelenting near-term headwinds, the company ended the first quarter with a mammoth backlog of $371 billion and the expectation that it’ll be cash flow positive by the end of 2022. Once a crutch, the 737 MAX should be pivotal in helping Boeing boost its cash flow and profitability. According to a March Reuters report, Boeing aims to improve 737 MAX production from 27 per month to begin 2022 to 47 per month by the end of 2023. That should provide quite the lift to the company’s operating cash flow.
Additionally, substantially higher jet fuel costs could be the impetus that encourages domestic and international airlines that have been holding off to modernize their fleets. With energy supply chains challenged (and that’s putting it mildly!), elevated crude prices are probably going to stick around for a while.
Though I feel Boeing has reached an attractive price point for long-term investors to consider putting their money to work, I’d also caution that reaching $298 is likely to be a bumpy, multiyear process.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix, Salesforce.com, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.