For more than 127 years, the iconic Dow Jones Industrial Average (^DJI 0.40%) has served as one of Wall Street's most-watched "health" barometers. What was once an index comprised of a dozen mostly industrial stocks in the late 1800s is now represented by 30 diverse, mature, multinational businesses.
But just because a majority of the 30 components that comprise the Dow Jones are mature -- i.e., generally slow-growing, dividend-paying companies -- it doesn't mean these time-tested stocks don't offer meaningful upside. Based on high-water price targets issued by a select group of Wall Street analysts, three Dow stocks could rise by as much as 45% in 2024.
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Intel: Implied upside of 40%
The first Dow component that at least one Wall Street analyst predicts can soar in the new year is semiconductor stock Intel (INTC -9.20%). Despite Intel's stock doubling from its 2022 bear market lows, Tigress Financial analyst Ivan Feinseth sees this leading chipmaker galloping to $66 per share. If Feinseth's price target proves accurate, it would lead to a 40% increase from where shares of Intel closed on Jan. 12.
When Feinseth raised his firm's price target on Intel to $66 two weeks ago, his note referenced a number of catalysts for the company. The first of those is an expected rebound in personal computer (PC) sales. The brief pop then drop in PC sales caused by the COVID-19 pandemic should lead to a normalization of sales in the current year. Despite losing some central processing unit (CPU) market share to chief rival Advanced Micro Devices, Intel is still the unquestioned CPU share leader in PCs and traditional data centers.
Feinseth also anticipates that Intel's foundry services segment will provide incremental benefits. The company is spending north of $20 billion to open two chip fabrication plants in Ohio this year. Intel is working on a chip-fab plant in Germany as well, with a third of the construction cost being covered by the German government. This evolution of Intel's businesses should result in it becoming the world's No. 2 foundry by 2030.
Further, Feinseth referenced Intel's "AI integration" as reason for upping his firm's price target on the company. While skeptics have harped on Intel's tardiness in developing an artificial intelligence (AI)-driven graphics processing unit (GPU) for high-compute data centers, the company currently has plans to introduce its Falcon Shores GPU as a direct competitor to Nvidia in 2025.
As an Intel shareholder, I certainly anticipate incremental improvements in demand for PCs and spending stabilization in traditional data centers in the new year. However, the bulk of Intel's lift from AI and foundry services won't be seen until next year. While I do believe $66 is a price target Intel can eventually achieve, I wouldn't count on that figure hitting in 2024.
JPMorgan Chase: Implied upside of 43%
A second Dow Jones stock with abundant upside in the new year, according to the prognostication of one Wall Street analyst, is money-center bank JPMorgan Chase (JPM 0.06%). Analyst Chris Kotowski of Oppenheimer raised his firm's price target on JPMorgan Chase to $243 in mid-November, which would translate into upside of 43%, based on where shares closed last week.
The beauty of bank stocks is that they have time on their side. Even though banks are highly cyclical and prone to an increase in loan delinquencies and credit charge-offs during recessions, downturns in the U.S. economy don't last long.
Out of the 12 recessions that have occurred since the end of World War II in September 1945, just three have made it to the 12-month mark, and none have surpassed 18 months. That compares to two periods of expansion that have reached the 10-year mark over the same span. Long-winded expansions allow bank stocks to steadily grow their loan portfolios.
JPMorgan Chase is also benefiting from the most-aggressive rate-hiking cycle in four decades. A collective 525-basis-point increase in the federal funds rate has helped America's largest banks generate billions of dollars in added net interest income each quarter.
Something that's helped differentiate JPMorgan Chase from its peers is the company's willingness to open new branches. Whereas most of its peers are consolidating their networks to reduce costs, JPMorgan is opening new branches to gain traction in underserved markets.
The unknown for JPMorgan Chase is how healthy the U.S. economy will be in 2024. A couple of predictive indicators and money-based metrics point to the growing likelihood of a recession this year. If a downturn does emerge, a $243 price target is highly unlikely. But if the U.S. economy remains on track with mid-single-digit growth, I'd opine that Kotowski's price target has a chance to be reached within 12 to 24 months.
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Boeing: Implied upside of 45%
However, the Dow stock that offers the most intriguing upside in 2024, based on a single high-water price target, is commercial aircraft manufacturer and defense contractor Boeing (BA 0.25%). In mid-December, analyst Gavin Parsons of UBS raised his firm's price target on Boeing to $315, which if correct would imply up to 45% upside this year.
The top catalyst for Boeing is production expansion. Boeing has been touting an expansion of 737 MAX production to 50 jetliners per month by the 2025-2026 timeline, up from a current 38 per month. Incrementally increasing 737 MAX production should boost the company's operating cash flow and give it a means to reduce its outstanding debt.
Additionally, Boeing has been a beneficiary of rising energy commodity prices. As the cost of jet fuel rises, the desire for commercial airlines to upgrade their fleet to more fuel-efficient options will grow. Although Boeing already has a sizable backlog for commercial jetliners, it can always get bigger.
But as I pointed out last week, Boeing is facing a challenging 2024, which has only become tougher following the unfortunate incident that took place earlier this month with one of its 737 MAX 9 jetliners. Though Wall Street continues to expect Boeing to take the next steps to increase 737 MAX production, a series of quality control/supply chain issues persistently impede this progress. It's highly unlikely that Boeing's production expansion stays on track (at least this year).
To add to the above, Boeing has performed miserably during prior economic downturns. Although it's impossible to predict when recessions will occur, Boeing has been one of the worst performers within the S&P 500 over the previous five recessions. It's a highly cyclical company that's historically been avoided by investors when trouble arises.
Boeing will also have a hard time overcoming its lofty valuation. Considering how many production issues the company has contended with in recent years, a forward price-to-earnings ratio of more than 55 makes it even more unlikely that Boeing will reach $315 in 2024.
