Sometimes the blue-chip stocks really are the best place to turn for solid investment returns. These are well-known companies with long records of achievement, companies that have become household names – and offer investors the advantages of a known position and a reputation for reliability.
But even with the blue-chips, finding just the right stock can still be a challenge. The markets generate a vast flow of information, and that flood of info can be an intimidating barrier to making profitable stock picks. But that’s where the TipRanks Smart Score comes in.
The Smart Score is a sophisticated, AI-driven data tool designed to help investors make sense of the market’s raw data. The automated tool uses an algorithm based on natural language processing to gather, collate, and crunch the various indicators put up by millions of daily stock transactions – and then assigns each stock a simple score, on a scale of 1 to 10, to give investors a clear sign as to the stock’s likely forward course. The Score is calculated based on a comparison of each stock’s performance with eight factors known to correlate with future share price gains. A ‘Perfect 10,’ the best possible Smart Score, shows a stock that is primed for outperformance.
We’ve used the TipRanks platform to pull up a couple of Perfect 10s from the blue-chip universe; these are two names that tick all the right boxes – and that have earned solid recommendations from the Wall Street analysts. Here are the details.
The Walt Disney Company(DIS)
We’ll start with one of the entertainment industry’s biggest names, Walt Disney. Really, does the Mouse need any introduction? Disney was founded in 1923, and was quickly recognized as a leading innovator in animation, creating cartoons that children loved – as well as their parents. The company transitioned from silent films to ‘talkies’ in the late 1920s, releasing its first film with a soundtrack in 1928 – and that film, Steamboat Willie, also brought us Mickey Mouse. The rest is history.
That history has encompassed the company’s development of one of the entertainment world’s largest portfolios of assets and attractions. The company operates through three main segments, Disney Entertainment, ESPN, and Disney Parks, Experiences, and Products. All three are well-known, and iconic in their own right.
Disney Entertainment includes the company’s content and media businesses – Disney Studios, Disney Streaming, Disney Platform Distribution, and what is probably the company’s single largest and best-known asset, the full library of Disney-owned films, everything from early animation dating to the 1920s to the more recent acquisitions such as the Star Wars, Marvel, and Indiana Jones film franchises. Disney’s movie library is widely considered to be the world’s single greatest such archive, at a level that few companies anywhere can even come close to matching. In addition to all of this, the company’s Entertainment segment is also the holding entity for Disney’s iconic characters and songs, and controls the associated marketing and spin-off products.
The company’s ESPN division comprises sports content and sports-related experiences, while Disney Parks, Experiences, and Products controls the eponymous theme parks, in Florida and California as well as internationally, along with the Disney cruise line plus assorted consumer products such as games and publications.
These business divisions are tied together by some of Disney’s strongest, and most intangible, assets – the company’s name and reputation. Few companies have reached Disney’s level of name recognition and branding success, making the name ‘Disney’ an asset that cannot be measured in purely fiscal terms.
Nevertheless, the stock has been under pressure recently on account of a mixed fiscal 2Q24 earnings report. Overall, Disney brought in $22.1 billion in revenue during the quarter, for a modest 1.3% year-over-year increase – but just sliding under the forecast by $50 million. The company’s bottom line earnings came to $1.21 per share by non-GAAP measures, a full dime better than the estimates.
However, despite streaming showing a solidly favorable shift in FQ2, the company provided a lukewarm forecast regarding streaming subscriber growth in the ongoing quarter and anticipated a slowdown in park visitations vs. the highest levels seen post-Covid, leaving investors disappointed with the print.
That said, in the eyes of Morgan Stanley analyst Benjamin Swinburne, Disney’s performance in Q2 bodes well for the future, and he says of the company, “Disney has the most direct consumer exposure among our large cap coverage group, primarily a function of its Experiences segment. We continue to see this business as uniquely valuable given its scale, growth, and ROIC characteristics… We remain optimistic that Disney can deliver nearly $1.5bn in DTC OI in FY25, ahead of consensus. The F2Q OI represented Disney’s first quarter of DTC profitability. We remain bullish with respect to its global pricing power, ability to manage expense growth, and benefit from password-sharing monetization.”
Swinburne goes on to rate DIS shares as Overweight (i.e. Buy), with a $130 price target (lowered from $135) that indicates potential for 23% growth on the one-year horizon. (To watch Swinburne’s track record, click here)
The rest of the Street agrees with the MS take. This old-name blue-chip has 23 recent analyst reviews on record, including 22 to Buy against a single Hold, for a Strong Buy consensus rating. The stock has a trading price of $105.79, and its $134.81 average price target suggests a potential one-year upside of 27.5%. (See DIS stock forecast)
AT&T(T)
Next on our list is AT&T, another of the world’s iconic brands. This company is one of the most venerable telecom firms operating in the US communications market. AT&T boasts a market cap of $123 billion and generated over $122 billion in revenue last year. By market cap, AT&T is the fifth largest telecom firm globally, and fourth in the US; by revenue, the company ranks third globally and second in the US. The telecom firm has reached this scale by building itself up as the largest wireless service provider in the US. In addition to wireless networking and cell phone services, AT&T also offers internet services, digital television, and even landline telephone services.
This company has been closely connected to the national rollout of the new 5G networks, and has used the new wireless tech, and its own network, to introduce its Internet Air service. This is billed as reliable wireless internet coverage, delivered over the 5G network, with simple pricing plans, easy home network management, and internet security options available to protect customers’ systems. The company has also adapted Internet Air for the business customers, featuring low monthly rates, a reliable 5G connection network, and no speed caps or data caps.
All of AT&T’s business activity generated just over $30 billion in revenue for the company during 1Q24, a result that came in just under the prior-year value. The top line missed the analyst expectations by $510 million. At the bottom line, AT&T saw a GAAP EPS of 47 cents per share, 2 cents lower than had been anticipated. On a more positive note, AT&T showed solid cash generation during Q1, reporting $7.5 billion in cash from operating activities, up $900 million year-over-year, and a quarterly free cash flow of $3.1 billion, for an impressive $2.1 billion y/y increase.
The company’s cash flow, along with the sound portfolio of services, brought this stock to the attention of Ivan Feinseth, 5-star analyst from Tigress Financial. Feinseth takes an upbeat view of this telecom giant, writing, “AT&T continues to build out an advanced diversified connectivity portfolio of increasingly resilient businesses and drive long-term growth. AT&T is experiencing early success with its recently introduced AT&T Internet Air, its targeted fixed wireless service, as it ramps up network coverage and rolls out its Internet Air for Business… We believe significant upside exists from current levels…”
For Feinseth, these comments back up a Buy rating on T, and his $29 price target implies that the shares will appreciate by 69% over the coming year. (To watch Feinseth’s track record, click here)
AT&T holds a Strong Buy rating from the analyst consensus, based on 11 recent recommendations that break down to 9 Buys and 2 Holds. The shares are currently priced at $17.17 and their $21.05 average price target suggests that T will gain 22.5% in the months ahead. (See AT&T’s stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
