Regardless of whether you're a new or tenured investor, 2022 was a rough year. All three of the major U.S. stock indexes were, at some point, entrenched in a bear market.
However, the Dow Jones Industrial Average (^DJI +1.79%) stood tall amid the turmoil. Despite its worst showing in 14 years, its 2022 decline of 9% was far less painful than the 33% drop suffered by the growth-stock-dependent Nasdaq Composite. Since the Dow Jones is comprised of 30 generally mature, profitable, and time-tested companies, it's well-positioned to outperform during periods of heightened uncertainty. This is a fact not lost on Wall Street analysts.
According to select high-water price targets from Wall Street analysts, the following three Dow stocks offer between 45% and 82% upside in 2023.
Image source: Getty Images.
Walgreens Boots Alliance: Implied upside of 45%
The first Dow Jones Industrial Average stock at least one Wall Street analyst believes can soar in 2023 is pharmacy chain Walgreens Boots Alliance (WBA +0.00%). Analyst Charles Rhyee of Cowen upped his firm's price target on Walgreens to $54 in November, representing a 45% upside from where shares closed this past week.
Usually, healthcare stocks make for no-brainer buys during periods of heightened uncertainty. Since we can't control when we get sick, there tends to be a relatively consistent demand for prescription drugs, medical devices, and various healthcare services. But because Walgreens relies so heavily on foot traffic into its physical stores, initial lockdowns during the COVID-19 pandemic made the company an exception to the rule in this highly defensive sector.
NASDAQ: WBA
Key Data Points
Thankfully, the worst of the pandemic looks to be behind us, which is allowing Walgreens Boots Alliance to move forward with a number of initiatives designed to improve operating efficiency and increase customer loyalty.
Although cost-cutting has been on the menu -- Walgreens has reduced its annual operating expenses by more than $2 billion and sold non-core assets to improve its balance sheet flexibility -- what's really been eye-opening is where management is liberally investing. For instance, the company has spared no expense on its digitization initiatives. Even with its brick-and-mortar stores remaining its core revenue driver, management understands that convenience is increasingly important to today's consumer. Beefing up Walgreens' e-commerce presence and drive-thru pickup are easy ways for the company to capture sustainable organic digital sales growth.
Walgreens Boots Alliance is also aggressively shifting its focus to healthcare services. It's partnered with and become a majority investor in VillageMD. As of the end of 2022, the duo has opened 200 full-service VillageMD health clinics co-located at Walgreens stores. Most competing clinics co-located in pharmacy stores can handle a vaccine or the common cold. VillageMD's health clinics are physician staffed, capable of full-service treatment, and geared to drive repeat visits.
With Walgreens stock valued at just 8 times Wall Street's consensus earnings forecast for fiscal 2023, Rhyee's price target does seem feasible.
NYSE: CRM
Key Data Points
Salesforce: Implied upside of 82%
A second Dow stock with the potential to skyrocket in 2023, based on the lofty price target of one Wall Street analyst, is cloud-based customer relationship management (CRM) software solutions provider Salesforce (CRM +0.51%). Analyst Kash Rangan of Goldman Sachs foresees shares of Salesforce hitting $300, which would imply upside of 82%.
Salesforce, like other high-growth tech stocks, has come under pressure as interest rates have climbed and the likelihood of a U.S. recession taking shape this year has grown. Both factors suggest demand for CRM solutions could slow in the coming quarters. The company also announced a 10% reduction in its workforce just four weeks ago, which adds fuel to the fire that growth may be slowing.
But in spite of very clear near-term headwinds, Salesforce has well-defined catalysts that could just as easily lift its valuation. To start with, CRM software is still, arguably, in the early innings of its utility. CRM software is used by consumer-facing businesses to enhance existing relationships and boost sales. Though it's commonly used by retail and service-oriented companies, it's beginning to find inroads in the industrial, healthcare, and financial sectors.
Salesforce is the runaway leader in CRM solutions. The company's share of global CRM software spending has grown annually for more than a half-decade, and sat at 23.8% in 2021, according to a report from IDC. That's more than its four closest competitors on a combined basis, and it's the ninth straight year Salesforce has been No. 1 in worldwide CRM share.
Aside from reaping the rewards of being the clear leader of a sustained double-digit growth opportunity, Salesforce has also benefited from CEO Marc Benioff's penchant for making bolt-on acquisitions. While not every deal has been a slam-dunk, the MuleSoft, Tableau Software, and Slack Technologies buyouts stand out for expanding the company's ecosystem and providing ample cross-selling opportunities.
Between acquisitions and organic growth, Salesforce looks to be on track to more than double its revenue over the next five years. This makes it an intriguing stock for patient growth-seeking investors. But given macroeconomic uncertainty, an 82% rise the remainder of 2023 for Salesforce is probably not in the cards.
Image source: Getty Images.
Intel: Implied upside of 60%
The third Dow Jones Industrial Average stock with a mammoth upside in 2023, according to one Wall Street analyst, is semiconductor stock Intel (INTC +0.00%). Analyst Gus Richard of Northland Securities believes this industry-leading chipmaker could hit $45. If Richard's prognostication proves accurate, this would equate to a 60% upside in Intel's stock this year.
Of the three Dow components on this list, Intel is, without question, going to have the toughest time hitting its Wall Street-assigned lofty price target -- and the company's fourth-quarter operating results show why.
Continued weakness in personal computer (PC) demand and growing competition in data center servers sent revenue in Intel's two core operating segments, Client Computing Group and Data Center/AI, down 36% and 33%, respectively, from the prior-year quarter. Since turnarounds usually take multiple quarters for chipmakers, this is shaping up to be a challenging year, which could be made even worse if a recession takes place.
NASDAQ: INTC
Key Data Points
On the other hand, Intel does have alluring catalysts that could drive its valuation notably higher if you're willing to hold shares for at least three years. An example would be the company breaking ground on two chip-fabricating facilities in Ohio last year. When these manufacturing facilities open in 2024, Intel will be able to lean on its foundry capabilities to boost its organic growth rate.
Although it comprises a relatively small percentage of total sales, autonomous vehicle company Mobileye Global (MBLY +0.64%) is another catalyst for Intel. Mobileye was spun off a few months ago, but Intel remains the majority shareholder. Mobileye delivered a record $565 million in sales in the December-ended quarter, which represents a 59% increase from the prior-year period.
It's also worth noting that while Intel has lost some market share to Advanced Micro Devices in PCs, data centers, and mobile, over the past couple of years, it still holds the vast majority of market share in these categories. Even with relatively minor losses to AMD, Intel's core cash-flow generators are still well-intact.
While the future for Intel still looks promising, I see virtually no chance of this chip giant making a run at $45 in 2023.
