It may not feel like it, but the Dow Jones Industrial Average (DJIA) is fresh off one of its best months since 1976. Thanks to a heavier weighting to energy and mega-cap value, the Dow may very well continue its winning streak over the widely-followed S&P 500 (SPX) and the tech-heavy Nasdaq 100 (NDX) exchanges. In this piece, we’ll have a look at three intriguing Dow components — Visa (NYSE: V), Walt Disney (NYSE: DIS), and Coca-Cola (NYSE: KO) — using TipRanks’ Comparison Tool. Each blue-chip stock will play a key role in how the Dow does, moving forward. Based on Wall Street projections, analysts view Disney as having the best bet to maximize upside over the year ahead.
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Undoubtedly, it’s difficult to tell what’s next for the old-time index comprised of 30 holdings. Many may view the Dow as a poor way to track broader markets, given the relatively small number of constituents.
Regardless, the Dow’s relative outperformance is remarkable and shows that money can be made in this bear market by those willing to pick their spots carefully. Specifically, Dow components are known for their blue-chip status and ability to persevere over the long haul.
Visa (V)
Visa is a credit card and payment tech company that’s lived through some pretty tough recessions only to come soaring back better than ever. At writing, Visa stock is down about 20% from its all-time high near $250 per share hit back in 2021. Though it’s been a wild ride since diving off its peak, Visa has continued to demonstrate that it can ride out a storm.
Year-to-date, Visa stock is down around 7%, far less than the 11.5% and 21% year-to-date drops in the Dow and S&P 500, respectively.
Despite recent macro headwinds, Visa has continued to beat earnings (clocking in $1.93 EPS in Q4, slightly higher than the $1.87 consensus). Indeed, it’s hard to remember the last time Visa missed the mark on its bottom line.
As a recession looms, there are reasons to believe that Visa can continue topping estimates. Management expects revenue growth to fall in the mid-teens. These are pretty upbeat expectations, given the storm that could be on the horizon.
Though analysts may be inclined to trim their price targets (Barclays recently reduced its target to $264 from $271), Visa will likely continue to act as a solid foundation for the Dow in what could be another volatile year for broader markets.
At writing, Visa stock trades at 28.7x trailing earnings. That’s a lofty multiple ahead of a recession year. Still, with travel spending likely to continue staging its recovery, it’s hard to pass on the payments behemoth at this valuation.
What is the Price Target for V Stock?
Wall Street seems to think Visa can continue to hold up amid this bear market, with a “Strong Buy” rating. The average V stock price target of $245.00 implies 21.9% upside from here.
Walt Disney (DIS)
Down around 34% year to date, Disney stock has been a major market laggard and one of the holdings that has weighed down the Dow. Its Parks business has recovered quite a bit since the worst of the pandemic. Still, China park closures could continue to weigh on results, given the country’s zero-COVID policy. Though the streaming business, Disney+, is well-equipped to win over new subscribers, thanks to a robust content pipeline (think new hit shows like Andor), margin pressures due to hefty content spending could persist for some time.
In any case, Disney continues to look like an attractive COVID-19 (and recession) recovery play that already has so many negatives baked in. With so much pressure on the stock, estimates are muted, with just $0.55 in per-share earnings expected for its coming fourth quarter (slated to release on November 8).
At 2.3x sales and 2.0x book value, Disney stock is a long-time blue chip at a very reasonable price. With longer-term catalysts that could fuel a rebound, it’s not a mystery why Wall Street stands by the stock after its brutal collapse, with Wells Fargo (NYSE: WFC) naming Disney as one of its top picks.
What is the Price Target for DIS Stock?
Wall Street is incredibly bullish on Disney at these levels. The average DIS stock price target of $144.64 implies 42.05% upside from these depths. Though a recession may make for a bumpy ride, it’s hard to pass up on a recovery play that could help the Dow power its way to gains in 2023.
Coca-Cola (KO)
Coca-Cola is a beverage maker that’s roughly flat year-to-date. Indeed, the Warren Buffett staple has surprised many with its inflation resilience amid numerous headwinds in the third quarter.
As a recession moves in, Coke shares should continue to act as a steady ship for the Dow. Despite price increases, Coke’s beverages are still a cheap way for consumers to get their sugar fix. As consumers continue eating out (even if it means transitioning from dine-in to fast food), we could see soda consumption continue to surge. Undoubtedly, Coke is a terrific sleep-easy stock ahead of a recession year.
Though the stock is quite expensive at 25.8x trailing earnings, given its limited growth prospects, Wall Street continues to stand by the name. Coke stock isn’t cheap, but it’s one of few stocks likely to win price target increases rather than trims over the next year.
What is the Price Target for KO Stock?
Wall Street loves Coke with a “Strong Buy” rating. The average KO stock price target of $66.29 implies 12.7% upside potential. That’s a modest but low-risk gain. With a 0.58 beta, KO stock is likely to help the Dow flex its muscles in what could be another choppy year.
Conclusion: Wall Street is Most Bullish on Disney Stock
As rates continue to creep higher, the boring, old Dow may continue to lead while leaving the rest of the market behind. Wall Street seems most bullish on Disney, with 42% gains expected over the next year.
