The Dow Jones Industrial Average has suffered a bruising recently. The index posted its fifth straight weekly decline, and is now down 3.79% so far this month. However it’s not all doom and gloom. On Monday, Dow Jones futures traded up thanks to the news that President Trump and Japan’s Prime Minister Abe Shinzo met to discuss a whole host of trade issues.
“Great progress being made in our Trade Negotiations with Japan. Agriculture and beef heavily in play. Much will wait until after their July elections where I anticipate big numbers!” tweeted President Trump on May 26.
And from an investing perspective, there are certainly compelling stocks to be found in the index. You just have to know where to look. Luckily TipRanks has released a new tool that allows you to compare stocks- and pinpoint the most promising investing opportunities. Here we ran a screen on all the stocks in the Dow Jones- and then sorted the results from the most to least bullish according to the Street.
As you can see these 5 stocks all boast a ‘Strong Buy’ Street consensus based on ratings published by analysts over the last three months. Here’s why these are the five favorite Dow stocks of analysts right now:
In first place comes software giant Microsoft. Even though shares are down in May, the stock is still trading up 24% year-to-date. And according to five-star Oppenheimer analyst Timothy Horan, plenty of upside lies ahead. He has just reiterated his buy rating with a $145 price target after attending the Microsoft Build Developer Conference a couple of weeks ago. From current levels that indicates shares can surge 15%.
Following the conference, Horan told investors it’s become “obvious that the company has totally restructured itself around the intelligent edge cloud.” As a result it is now better positioned to create and drive new services through developer partnerships. According to Horan, MSFT sees Azure as a base layer that customers use to run their applications but also as a building block for MSFT services up the software "stack". That’s through dozens of new PaaS (Platform as a Service) and SaaS (Software as a Service) offerings.
Plus MSFT's services are being re-architected to run on Azure—Office 365, Dynamics 365, LinkedIn and Teams. By running on Azure, MSFT applications become cheaper to operate and easier to innovate and integrate. “We are just at the beginning of this transformation, with innovation accelerating” the analyst concludes.
Next up comes the mighty payments processor Visa. Like Microsoft, Visa has posted impressive gains year-to-date (23%), however in the last month shares have marginally pulled back in keeping with the broader market.
But there’s plenty to look forward to. Notably, Goldman Sachs analyst James Schneider has just initiated coverage of the stock. He starts Visa off with a buy rating and a bullish $188 price target, citing volume growth in Europe, price increases and an expanding business payments unit. Schneider believes Visa enjoys ‘multiple opportunities’ to beat current consensus estimates. He also singles out upcoming product announcements and earnings reports as positive price catalysts.
And for investors cautious about pending legal and regulatory issues, Schneider has a reassuring point. He notes that both Visa and Mastercard have escaped recent litigation relatively unscathed, by settling claims with minimal financial impact or change to their market leading positions.
This isn’t the only analyst optimistic about Visa’s outlook. In the last three months Visa has received 18 buy ratings and just 1 hold rating. “We remain attracted to Visa's dominant position in the global card network market and its strong, recognizable international brand” cheers Cantor Fitzgerald’s Joseph Foresi.
These are exciting times for Disney. The company is on the brink of launching its much-hyped streaming service Disney+. And it has just allowed a lucky few into its new Star Wars Land, "Galaxy's Edge" at Disneyland, California.
One of the visitors to the new park was Bernstein analyst Todd Juenger. Although he wasn’t allowed to take photos, Juenger nevertheless revealed that the two main attractions (Millennium Falcon: Smugglers Run, and Rise of the Resistance) were "absolutely jaw-dropping."
For investors, Juenger advised that the attraction will exceed reasonable guest expectations by a wide margin; and that it is more incremental for revenue than previously imagined. That’s because in Disneyland, it adds almost 14 acres of capacity, while in Disney World it will utilize the most-underused gate, meaningfully expanding overall guest capacity.
"This is the biggest attraction we’ve ever built," Scott Trowbridge, Portfolio Creative Executive at Walt Disney Imagineering, said in a recent presentation. "It should be epic, because, Star Wars, right? That’s why we’re going big with this attraction." The Disneyland park will open on May 31, and from June 24 it will be possible to enter without reservations.
Encouragingly, Disney’s recent earnings report shows a bullish story for theme parks. The Parks and Consumer Products segment delivered results roughly $200M above consensus estimates. “The segment has been a key growth driver for the company over the last few years, accounting for roughly 60% of total segment operating income gains from '16-'19E” writes Rosenblatt’s Mark Zgutowicz.
“We are encouraged the company continues to invest in this segment with Star Wars Galaxy Edge opening in May/ August in CA/FL, as well as Marvel properties and expanding in Asia. We assume the segment is able to continue to grow returns at roughly the same rate over the next five years” concludes the analyst. This ‘Strong Buy’ stock boasts 15 buy ratings vs 3 hold ratings, while the average analyst price target comes in at $152. See what other Top Analysts are saying about DIS.
Managed healthcare giant UnitedHealth Group has had a bumpy ride recently. That’s as UNH, and indeed the health care sector in general, continue to be pressured by worries around “Medicare For All.” This proposes a transition to a national single payer health plan backed by a number of the Democrats’ 2020 presidential hopefuls.
“Although the extreme versions of such a bill would be devastating to the healthcare sector, we see no shot of them going through in today's (and tomorrow's) political environment” writes top-ranked Oppenheimer analyst Michael Wiederhorn. He reiterated his buy rating recently with a $305 price target indicating robust upside potential of 23%.
“We believe the regulatory fears that have pressured the group are significantly overblown. We would be buyers of UNH on the weakness and maintain our Outperform rating” advises the analyst. He is a fan of the company’s diversification, strong track record, elite management team and exposure to certain higher growth businesses (including the Optum IT business).
A similar message comes from Citigroup’s Ralph Giacobbe. Tellingly, the analyst has just upgraded UNH from Hold to Buy. He also boosted his price target considerably from $247 to $280. "We acknowledge that the diversification story isn’t a new phenomena, but buying a bellwether name at discounted valuation presents an attractive opportunity considering the pullback has largely been premised on fears that we don’t expect to materialize” explains Giacobbe.
Overall, UNH scores a buy rating from 10 out of 11 analysts polled by TipRanks. The average analyst price target works out at $284 (15% upside potential). See what other Top Analysts are saying about UNH.
For our final best-rated Dow stock we have network leader Cisco Systems. The company has just posted a slightly ahead of consensus quarter on nearly all metrics once again. “Overall market demand and execution prove resilient; maintain Outperform” celebrated Baird analyst Jonathan Ruykhaver following the report.
“Management continues to string together solid quarters during the ramp phase for Cat 9K and SD-WAN. Cisco's EPS algorithm produced normalized growth of 18% in 3Q19, which appears sustainable for the visible future” commented the analyst. He has a $57 price target on shares.
Cisco reported FQ3 revenue/non-GAAP EPS of $12,958 million/ $0.78, representing revenue growth of 4% YoY (+6% excl. SPVSS), versus consensus of $12,889 million/$0.77. Meanwhile gross margin was up roughly 50 bps QoQ and up 70 bps YoY.
The key takeaway: “We remain enthusiastic towards the product strategy and runway for growth over the next several years despite some concerns over a shakier spend macro and political instability.”
Clearly the Street shares this upbeat analysis. With a ‘Strong Buy’ consensus, 15 out of 19 analysts give CSCO the thumbs up. Their average price target works out at $59 for 9% upside potential. That’s with shares surging 25% year-to-date- and experiencing a relatively minor dip of 3% in May. See what other Top Analysts are saying about CSCO.
Enjoy Research Reports on the Stocks in this Article:
