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All Contents © 2020The Kiplinger Washington Editors
By Harriet Lefton, Contributing Writer
| April 22, 2019
The Dow Jones Industrial Average is enjoying a remarkable rally. In 2019, Dow stocks – a group of 30 American blue-chip companies – have soared 13.9% as a group. We now find ourselves within striking distance of the index’s all-time high, and if earnings can clear a low expectations bar, further gains could be on tap.
But not all Dow Jones stocks are created equal. So which ones should you be keeping an eye on right now?
We have used TipRanks’ new Stock Comparison tool to pinpoint the five Dow components with the highest ratings from Wall Street analysts right now. All five stocks share a “Strong Buy” Wall Street consensus based on ratings doled out over the past three months.
Here are the five highest-rated Dow Jones stocks right now. Let’s delve in and see why analysts are so optimistic.
Data is as of April 21.
Market value: $950.1 billion
TipRanks consensus price target: $128.00 (4% upside potential)
TipRanks consensus rating: Strong Buy
Microsoft (MSFT, $123.37) is the only company on this list of Dow stocks that has any “Sell” calls against it. But it’s just one over the past three months, as well as one “Hold,” against 23 “Buy” ratings.
Morgan Stanley’s Keith Weiss singles out Microsoft as “the top secularly positioned firm in Tech” thanks to its differentiated public cloud offering and solution portfolio. Software is the fastest-growing IT sector, with software spending expected to grow 5% this year, he writes.
“With software-centric themes (cloud computing, digital transformation, artificial intelligence [and] machine learning, business intelligence and analytics, and security software) all positioning at the top of the CIO priority list, it’s little surprise software continues to gain share of the IT budget,” Weiss writes. “We think Microsoft is well-positioned to benefit from these key secular themes.”
Microsoft does not disclose revenue for its Azure cloud computing service, but Weiss estimates that it delivered more than $3 billion in revenue in Q4. What we do know for certain is that Azure sales showed a 76% year-over-year increase in its most recent quarter.
JPMorgan analyst Mark Murphy says that figure looks set to soar. “Checks indicate a consistent and healthy MSFT demand environment with no degradation, especially for Azure, as we detect more long-term Azure contracts and overall extremely consistent commercial demand and execution,” he wrote on March 28. You can check out more analysis of Microsoft in TipRanks’ MSFT Research Report.
Market value: $230.8 billion
TipRanks consensus price target: $139.58 (16% upside potential)
Oil-and-gas giant Chevron (CVX, $119.86) has been among the noisiest Dow Jones stocks of late after it announced it will buy exploration-and-production (E&P) company Anadarko Petroleum (APC) for a whopping $33 billion, significantly boosting Chevron’s position in both shale and natural gas. As of year-end 2018, Anadarko had 1.47 billion barrels-equivalent of proved reserves, making it one of the world’s largest independent E&P companies.
“This transaction builds strength on strength for Chevron,” CEO Michael Wirth said on April 12. “This transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2 billion and will be accretive to free cash flow and earnings one year after close.” Following the news, analysts chimed in with approval. For instance:
See what the rest of Wall Street has to say about Chevron in TipRanks’ CVX Research Report.
Market value: $236.7 billion
TipRanks consensus price target: $135.15 (2% upside potential)
Shares in Walt Disney (DIS, $132.45) exploded by 13% and analysts rushed to reiterate their support following the company’s investor day on April 11.
Disney announced details for its long-awaited direct-to-consumer (DTC) streaming service, Disney+, which should launch in the U.S. on Nov. 12. Notably, the company surprised investors with a cheaper-than-expected price point of just $6.99 per month. That compares very favorably with Netflix’s $12.99-per-month “Standard” plan. Disney will set itself apart from rivals by focusing on kid-friendly content including its own animated classics, the entire Pixar library, nearly the entire Star Wars library, several Marvel films, 250 hours of National Geographic content and the entire Simpsons streaming catalogue.
BMO Capital and Cowen & Co. analysts upgraded DIS from “Hold” to “Buy” following the event. Other pros weighed in with positive commentary, too.
“We view the company’s high-quality IP, expanded original content lineup, engaging user interface, competitive pricing … and go to market strategy (leveraging all DIS assets globally) all highly favorably, boosting our conviction in incremental value creation potential via DTC,” Merrill Lynch’s Jessica Cohen wrote after the event. She reiterated her “Buy” rating with a $144 price target.
Rosenblatt Securities’ Mark Zgutowicz gave a similarly upbeat analysis of the streaming service’s prospects: “We exit the investor day more bullish on Disney+ and still believe the shares reflect little credit for DTC prospects both near and long-term,” he wrote. “Detailed Disney+ guidance provides an important, and we believe, conservative baseline for the next several years of consistent returns.”
Zgutowicz has a $150 price target on this Dow stock, suggesting he sees a further 13% upside potential lies ahead. Find out what other analysts think of Disney in TipRanks’ DIS Research Report.
Market value: $213.7 billion
TipRanks consensus price target: $286.40 (29% upside potential)
Health-care giant UnitedHealth Group (UNH, $221.75) was until very recently one of two Dow Jones stocks with all “Buy” ratings over the past three months. However, while the company recently reported a smooth Q1 beat and raised its guidance for the current quarter, one analyst reiterated his “Hold” call. The good news? The other 10 recent calls were all “Buys,” and the company has no “Holds” or “Sells” among TipRanks’ highest-rated analysts.
Indeed, UNH is one of the best-equipped stocks to weather government scrutiny over drug prices. The company is leaning heavily into technology and is now reaping the rewards of investing in data and analytics to enhance its health plan offerings.
“Within our managed care coverage, UNH has effectively set the bar for others regarding how it has deployed capital to improve health plan performance,” Cantor Fitzgerald’s Steven Halper writes. “We expect the strong performance to continue over time. We reiterate our view that UNH should be a core holding in all large cap growth portfolios.” This five-star analyst sees prices surging 40% to $310.
What sets UNH apart is its highly successful health IT services business, Optum. This rapidly growing unit delivered sales of $26.4 billion in the most recent quarter, up nearly 12% from the previous year. The segment “accounted for 47% of consolidated operating profit in 2018,” Halper writes.
Halper has a strong stock picking track record. On UNH specifically, he delivers a 72% success rate and a 20% average return per recommendation. For more information on UnitedHealth, get a free UNH Research Report from TipRanks.
Market value: $360.8 billion
TipRanks consensus price target: $167.93 (5% upside potential)
Among all 30 Dow stocks, Visa (V, $160.16) is the best-rated blue chip with 16 consecutive buy ratings over the past three months.
The rave reviews include a reiterated “Buy” rating from five-star Nomura analyst Bill Carcache, who calls V stock his top pick in the payments space.
Although decelerating e-commerce growth and slowing cross-border volumes are headwinds, Carcache believes payment stocks remain relatively attractive at a time when macro data continues to surprise to the downside.
“The safe haven nature of V, MasterCard, and PYPL – which offer potential ~15-20% through-the-cycle compound annual growth – is evidenced by the fact that they continue to trade at historical premium valuations despite deceleration fears,” the analyst wrote on April 11.
Of these stocks, Carcache believes Visa is set to deliver the most alpha during Q1 earnings, writing, “To say that V tempered investor expectations on its last earnings call is an understatement. We are certainly bullish on MA, but we do not believe that V deserves to trade at a 2.5 turn discount when it is generating revenue growth that is on par.”
Top-rated Wells Fargo analyst Donald Fandetti has just substantially boosted his price target from $161 to $181 (13% implied upside). Like Carcache, he is bullish Visa heading into earnings, citing improving consumer trends for card companies. Discover more from TipRanks in its V Research Report.
Harriet Lefton is head of content at TipRanks, a comprehensive investing tool that tracks more than 5,000 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.