The Dow Jones Industrial Average (DJINDEXES: ^DJI) is up only 4% this year, compared to the S&P500‘s 15% profit and the Nasdaq-100‘s return of 17%. The Dow Jones underperformed the other two major indexes for two main reasons: It tracks only 30 prominent companies and is more heavily weighted toward slower-growing sectors. It is also a price-weighted index, which makes it arguably less accurate than a market-cap weighted index like the S&P 500 and the Nasdaq-100.
Nevertheless, the 30 companies that make up the Dow Jones – which are also included in the S&P 500 – are still a good place to start looking for stable blue-chip stocks. So today I’m highlighting three of those stalwarts that are set to take off in 2024 and beyond: Amazon (NASDAQ: AMZN), Walmart (NYSE:WMT)And IBM (NYSE: IBM).
1. Amazon
Amazon is the world’s largest e-commerce and cloud infrastructure company. In 2022, revenues rose only 9% as macroeconomic headwinds slowed growth in the marketplace and cloud businesses. It’s an investment in the struggling EV maker Rivaans also had an adverse effect and caused Amazon to report a net loss for the year.
That delay scared many investors. But in 2023, sales rose 12% as the company returned to profitability. That acceleration was driven by the stabilization of the North American and international retail divisions, faster delivery speeds, the expansion into higher growth overseas markets and the growth of the integrated advertising business. The cloud unit, which typically subsidizes the lower-margin retail segment with higher-margin revenue, rebounded as more companies upgraded their infrastructure to support larger workloads, large language models and new generative AI applications.
Analysts expect Amazon’s revenue and earnings to grow 11% and 57% this year, respectively. The stock still seems fairly valued at 40 times forward earnings, and could rise much higher as the macro environment improves.
2.Walmart
Walmart is one of the few brick-and-mortar retail giants that has consistently kept up with Amazon. It has accomplished that by expanding its e-commerce marketplace, turning its stores into fulfillment centers for online orders, matching Amazon’s prices, and rolling out its own Walmart+ subscriptions to counter Amazon Prime.
Walmart also competes against it Costco in the warehouse retail market with Sam’s Club, and it operates additional banners and e-commerce sites in 19 other countries. That makes it far more diversified than many U.S. retailers.
In fiscal 2024 (which ended in January), Walmart’s sales and adjusted earnings per share both rose 6%. For fiscal 2025, analysts expect revenue and adjusted earnings per share to grow 4% and 9%, respectively, as domestic operations recover and international operations expand. The company’s stock still seems reasonably valued at 28 times forward earnings, it pays a decent dividend yield of 1.2%, and it’s in better shape than most of its peers.
3.IBM
IBM was once considered a dinosaur of the technology industry that had fallen far behind its nimble cloud-based peers. But the company has divested its slower-growing managed infrastructure services unit Kyndryl in late 2021, it expanded its Red Hat subsidiary to develop more hybrid cloud services and introduced more AI features.
By streamlining its operations and expanding its fast-growing hybrid cloud and AI businesses, IBM began growing again. In 2023, revenue and adjusted earnings per share rose 2% and 5%, respectively, even as the cloud market faced severe macroeconomic headwinds. Analysts expect revenue and adjusted earnings per share to rise 2% and 3%, respectively, in 2024.
These growth numbers may seem anemic, but they mark a huge improvement over previous years of sales declines. IBM shares look cheap at 17 times forward earnings, and the high dividend yield of 3.9% should limit downside potential. In the long term, the stock could move much higher as the hybrid cloud and AI business accelerates.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Amazon. The Motley Fool holds positions in and recommends Amazon, Costco Wholesale, and Walmart. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.
These 3 Dow Stocks Will Rise in 2024 and Beyond originally published by The Motley Fool
