There isn't a lot of love for Disney (DIS -0.04%) these days. It has lost to the market for three consecutive years. Shares of Home Depot (HD 0.94%) also fell just short of the market's return in 2023, as sales slumped in a problematic real estate market. Verizon (VZ 1.17%) fared even worse. It's the one stock on this list that actually declined last year if you back out the telco's chunky dividend.
All three stocks are members of the Dow Jones Industrial Average (^DJI 0.40%), a problem since the index itself failed to keep pace with the larger and more widely followed S&P 500 in 2023. Things should get better for Disney, Home Depot, and Verizon this year. Let's see why these are three stocks set to take off in 2024 and beyond.
Disney
Disney shares inching 4% higher in 2023 pales in comparison to the market's big gains last year, and it followed back-to-back years of double-digit percentage declines. The Mickey Mouse company is losing billions on Disney+. Its historically resilient theatrical releases had a disappointing year, falling short of rival Comcast's (CMCSA 1.85%) in total global box office receipts for the first time since 2015. Its traditional media networks business also felt a double whammy of cord-cutting and weak ad market.
Things should get better on most fronts for Disney this year. CEO Bob Iger continues to expect Disney's streaming operations to turn profitable by the fiscal fourth quarter, which ends in September. Disney put out fewer films than Comcast last year, explaining why it wasn't the box office leader for the first time in eight years. It also has new films in the Inside Out, Deadpool, and Lion King franchises coming out in 2024, giving it the inside track to regain its market leadership at the multiplex. Cord-cutting will continue to be a problem for its media networks, but if the TV advertising market recovers and Disney+ turns a financial corner, the media giant will be just fine.
Image source: Getty Images.
The market's bracing for slow yet steady growth on Disney's top line in these next two fiscal years. The real stock story here will be the bottom line as Disney+, Hulu, and ESPN+ stop sandbagging the entertainment bellwether's income statement.
Analysts see Disney's earnings per share climbing 16% this fiscal year, accelerating to 20% next year. With Disney stock trading at a reasonable 17 times next year's earnings and some of the strongest intellectual properties in the business, you can't keep the House of Mouse down for long.
Home Depot
The orange aprons may have seemed like white flags last year. The only pocket of resiliency in the housing market was new construction: Developers thrived given the lack of secondhand homes hitting the market as folks were scared to swap their low mortgage rates for higher living costs in new digs.
Home Depot's sales have declined for all three quarters of the current fiscal year. It's not just the lack of real estate activity. Homeowners who used to bankroll makeovers through cash-out refinancing moves are on the sidelines given the stiff borrowing costs. The climate should get kinder in 2024. The growing consensus among economists is that interest rates will hold steady if not decline this year, and if that's true, all the pent-up demand for Home Depot visits that have accumulated as mortgages will come crashing in through its automatic sliding doors.
Like a long-standing home, this stock has good bones, with a tendency to deliver monster gains for long-term investors. Wall Street sees revenue and earnings inching higher for Home Depot in the new fiscal year, which kicks off next month. This trickle could be a gusher if the climate for housing activity improves in 2024.
Verizon
Finally, let's answer Verizon's incoming call. Unlike its largest rival, the wireless carrier hasn't been sidetracked by costly combinations with media networks and satellite TV outfits over the years. Verizon's focus has been on telco, admittedly not a cheap business to crack with big investments in 5G technology and other infrastructure costs.
Verizon isn't exciting. Annual revenue growth hasn't topped 6% in 14 years. The pricing elasticity that bulls expected after two smaller rivals joined forces in 2020 or the 5G revolution has yet to materialize. However, Verizon's 6.8% yield is going to look even better in 2024 as income investors will likely see fixed income rates contract this year. Lower rates will also help tame Verizon's hefty debt exposure. Fetching just 8 times trailing earnings, Verizon could be the right call for value investors to make in 2024.
