For nearly 126 years, the Dow Jones Industrial Average (DJINDICES: ^DJI) has been a popular benchmark of investing success. Initially a 12-stock index that was (not surprisingly) packed with industrial companies, the Dow Jones is now composed of 30 highly diverse, multinational businesses.
Although the Dow has its flaws (e.g., it's a price-weighted index), the mature and profitable companies it houses are just the type of businesses we'd expect to increase in value over long time. It's what makes Dow stocks such widely held investments.
But not all of this iconic index's components are created equally. Based on the high-water price target estimates from Wall Street, the following trio of Dow stocks offer upside ranging from 53% to as much as 95% over the next 12 months.
Intel: Implied upside of 53%
The first Dow stock with incredible upside potential over the next year is semiconductor giant Intel (NASDAQ: INTC). According to the $72 price target issued by Tigress Financial analyst Ivan Feinseth, Intel could rise by 53%.
In particular, Feinseth believes the company's ongoing investments in processor development could improve its market share. He also points to the upcoming initial public offering of Mobileye as a possible upside catalyst for Intel's shares (I'll touch on this in a moment).
Investors who buy Intel stock are typically doing so for two reasons: either to take advantage of the steady operating cash flow from its legacy operations or to position themselves for an organic growth surge over the next couple of years.
When it comes to the former, Intel is generating the bulk of its revenue from its Client Computing Group (CCG) and Data Center Group (DCG). In plainer English, it's still raking in the cash as a processing giant for personal computers and data center solutions. While these aren't the high-growth opportunities they once were, CCG and DCG are generating juicy margins and abundant cash flow that Intel can use to reinvest in higher-growth initiatives and pay its delectable 3.1% dividend yield.
Beyond its legacy operations, Intel is expected to make waves with its Internet of Things (IoT) solutions. Sales for IOT solutions jumped 33% last year, although some of this growth was simply a normalization of order demand following the COVID-19 lockdowns in 2020. As wireless devices become more interconnected, demand for IoT solutions should steadily grow.
Additionally, autonomous vehicle company Mobileye, which Intel acquired for $15.3 billion in 2017, is set to go public. Mobileye, which makes driver-assist chips used in newer vehicles, grew sales by 43% in 2021 to $1.4 billion. Given the demand surrounding next-gen vehicles, spinning out Mobileye could be a moneymaking venture for Intel.
While I do see ample upside opportunity in shares of Intel, $72 might be asking a bit much over the next 12 months for a traditionally slow-moving stock.
Walt Disney: Implied upside of 74%
A second Dow stock that Wall Street believes could deliver magical gains over the next year is Walt Disney (NYSE: DIS). Not to sound like a broken record, but Ivan Feinseth of Tigress holds the top price target on Disney as well. If his price target of $229 comes true, Disney shareholders would enjoy a 74% gain.
In a recently issued research note, Feinseth pointed to new theme park attractions, theme park reservation optimization, higher in-park spending, and increases in the company's streaming Disney+ platform as reasons shares could head significantly higher.
As many of you are probably aware, Walt Disney was clobbered by the pandemic. The company has struggled with temporary theme park closures, as well as people/families who aren't quite ready to interact in public spaces with large crowds. But things seems to be changing.
Disney's theme parks saw increased attendance in the fiscal first quarter (ended Jan. 1, 2022), with innovation and pricing power really packing a punch. Disney hasn't had a problem passing along higher costs to its guests, and has benefited from the introduction of its Genie+ and Lightning Lane entry services for guests who want faster access to their favorite rides and attractions. The simple fact that Genie+ and Lightning Lane are mentioned as growth drivers indicates that lines are lengthening at Disney's theme parks (i.e., travelers have returned).
Aside from a big rebound in theme park activity, subscription growth from Disney+ continues to amaze. In a little over two years since Disney+ launched, the company has attracted nearly 130 million subscribers. It demonstrates the power of convenience tied to streaming services, as well as the value placed on Disney's decades of popular and proprietary content.
But in a situation similar to Intel, I believe $229 over 12 months is too aggressive a price target for Walt Disney. While a lot has gone right to start the new fiscal year, it's unclear how rapidly rising inflation could affect the broader economy, and thusly the vacation plans of consumers. I expect Walt Disney to increase in value over time, but $229 isn't on my personal radar within the next year.
Salesforce: Implied upside of 95%
However, the crème-de-la-crème of upside opportunity lies with customer relationship management (CRM) company Salesforce.com (NYSE: CRM). According to Wall Street's high-water price target, Salesforce could hit $385 over the next year. This implies up to 95% upside in what's consistently been the Dow's fastest-growing company.
For those of you wondering, cloud-based CRM software solutions are used by consumer-facing businesses to enhance existing relationships. For example, CRM software can be used to handle product or service issues, oversee an online marketing campaign, or be tasked with running predictive sales analyses. This software is popular with the service industry, but is finding a home in less-common channels, such as the financial, healthcare, and industrial sectors.
Although estimates vary, global spending on CRM software is expected to grow by a double-digit percentage through at least the midpoint of the decade. Salesforce sits at the center of this rapidly growing trend. Based on a report from IDC, Salesforce brought in nearly 24% of global CRM spend in the first half of 2021. The four closest competitors to the company in market share don't even add up to 20% on a combined basis. This makes it the clear go-to for CRM solutions.
Another reason Salesforce is delivering superior growth is CEO Marc Benioff's penchant for making earnings-accretive acquisitions. Some of the more notable buyouts include MuleSoft, Tableau, and Slack Technologies. Buying these companies has expanded Salesforce's reach to small and medium-sized businesses, as well as given it added platforms to cross-sell its solutions.
If Benioff's aggressive growth outlook proves accurate, Salesforce should deliver at least $50 billion in sales by fiscal 2026 (calendar year 2025), which would equate to a near-doubling in sales from fiscal 2022 ($26.5 billion). This type of growth may well merit a $385 share price. However, achieving 95% upside in the next 12 months probably isn't in the cards.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns and recommends Intel, Salesforce.com, and Walt Disney. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel, long January 2024 $145 calls on Walt Disney, short January 2023 $57.50 puts on Intel, and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.