As stocks rise, analysts generally lift their price targets on key stocks. As stocks fall, analysts generally lower their price targets. It is a game on Wall St., but it is a game all investors have to play. 24/7 Wall St. has reviewed all 30 of the Dow Jones Industrial Average components looking to see which of the 30 offered the most upside. While you might guess that it is the battered banks or technology players that had the most upside, there were a couple of surprises. Even in these hard times it was surprising to see that analysts expect more than 20% upside in six of the 30 DJIA components.
We have used the current share price and the consensus analyst price target objective on each from Thomson Reuters to determine “the most implied upside” on each of these stocks. We also have added in color and history on each to give a better frame of reference. We have not included the dividend for implied upside, but we have listed the payout on each.
Alcoa Inc. (NYSE: AA) has been down and out in aluminum, while still maintaining that the aluminum market of today will double by the year 2020. The current price of $8.50 compares to a consensus analyst target price of $10.68. This left a surprising upside of 25%. The aluminum giant was once considered a takeover target, but that was long ago, and it also offers a relatively low yield for a DJIA component of only 1.4%. That $10.68 upside target compares to a 52-week range of $7.97 to $12.93.
You probably guessed that the banks were going to be on the list. After all, the Wall St. analysts do in fact work for Wall St. That leaves little need to go on and on here. Bank of America Corporation (NYSE: BAC) trades at $7.64, and the consensus analyst price target of $9.33 leaves an implied upside of 22%. The yield is a paltry 0.5%. Then there is JPMorgan Chase & Co. (NYSE: JPM), which has been left injured after the London Whale blew out a few billion in “hedging” losses. At $36.30 and with a consensus analyst price target of $44.91, Team Jamie Dimon has an implied upside of 23%. These banks trade at huge discounts to their book values, but for the foreseeable future we have maintained that book value will be a ceiling rather than a floor.
Caterpillar Inc. (NYSE: CAT) is well off of its highs, and the consensus target is well under its 52-week high. Perhaps all that exposure to China and emerging growth has two sides to the story. At $86.35, Caterpillar’s consensus analyst price target of $107.89 leaves an implied upside of 25% or so, and its dividend yield is 2.4%. That $107.89 target compares to a 52-week range of $67.54 to $116.95.
Cisco Systems Inc. (NASDAQ: CSCO) remains a favorite of analysts as far as upside, but the networking and communications technology giant remains a very bulky company. The stock is at $16.69, and the consensus target of $21.04 leaves an implied upside of 26%. That is just under the 52-week high of $21.30 as well. John Chambers and friends at least pay a 2% dividend to wait.
Hewlett-Packard Co. (NYSE: HPQ) can be of very little surprise to be on the implied upside list. It probably is not shocking that it has the most implied upside. After all, the PC and IT giant is battered and bruised, it is under new management, it is turning around and it competes against Apple Inc. (NASDAQ: AAPL) for computing devices and International Business Machines (NYSE: IBM) for IT spending dollars. We also would comment that it is becoming a key short sale of Jim Chanos. The price today of $18.69 compares to a 52-week range of $17.41 to $34.00 and to the consensus analyst target of $26.52. That leaves an implied upside of some 41% or so, plus it has a 2.9% dividend yield.
The runner-ups were so close, yet so far away in implied upside. The Boeing Co. (NYSE: BA) had 19% implied upside, Microsoft Corp. (NASDAQ: MSFT) was at 19% in implied upside, and United Technologies Corp. (NYSE: UTX) was just over 19% in implied upside.
Again, keep in mind that these consensus targets change weekly and they tend to chase the markets up and down.
JON C. OGG