As 2016 winds down and 2017 becomes the prevailing concern, investors have to wonder what to expect. Donald Trump unexpectedly beat Hillary Clinton in the presidential election, and now both sides of the aisle are considering more pro-business and higher growth economy oriented than we have been used to for recent years.
Investors have bought every major market pullback for more than five years now, and the bull market is almost eight years old. Those same investors are looking for value, and they are looking for new ideas to generate income and gains ahead. It turns out that 11 of the 30 Dow Jones Industrial Average (DJIA) stocks have a consensus (mean) analyst price target from Thomson Reuters that calls for more than 10% upside in the coming 12 months, and that is without considering their dividends.
24/7 Wall St. has evaluated each of these 11 Dow stocks. Many of these companies are likely to raise dividends in 2017, and many are expected to be beneficiaries of repatriating billions in overseas cash. With the bull market mature, valuations may matter, so we have included an earnings multiple for 2017 on each name. We also have included color on each company and basic trading history.
There are some serious caveats to consider as well. Many Dow stocks are now valued above their consensus analyst target prices, even if these are not. The post-election rally has taken many of the Trump-beneficiary stocks up, perhaps with too much good news being priced in. Analysts are also wrong just about as often as regular investors. Sometimes the analysts just get their thesis wrong, or sometimes an outside force that was unknown yanks the bull-case out from under a stock.
Investors need to understand that these target prices from Thomson Reuters should not yet be considered full 2017 targets for a bull-bear analysis. In fact, some analysts have not updated their 12-month price targets for weeks or even months, and they could be subject to serious revisions in December and after the start of 2017.
When we look at the upside here, the average total return (gain in stock plus dividends) when you consider 2017 dividend hikes and buybacks would be closer to 15%. That of course does not mean that the rest of the Dow would rise unilaterally with these, nor by the same amounts, but if so then the Dow could be looking at getting closer to 22,000 in late 2017.
Again, there are many “ifs” and a whole lot of things that have to go right without any hiccups that would have to take place to get there. These companies all matter to the economy, as they would have a combined market cap of more than $2.3 trillion as of now.
Shares of Apple Inc. (NASDAQ: AAPL) were last seen at $109.05, and its consensus analyst price target is now up at $131.00. If analysts are right, that implies upside of 20%. Then there is the 2.1% dividend yield to consider, and Apple is valued at less than 11 times next year’s earnings estimate.
Credit Suisse just on December 6 reiterated its Outperform rating and $150 price target for Apple. The firm is looking forward to the iPhone 8 super-cycle, and the analysts feel Apple’s earnings outlook is strong regardless of the gross margins and OLED capacity for the iPhone 8. One additional boost is that Apple has the largest cash trove of all companies, and it buys back large amounts of stock.
Apple has a 52-week trading range of $89.47 to $119.86 and a market cap of $581.5 billion.
Recently trading at $29.55, Cisco Systems Inc. (NASDAQ: CSCO) has a consensus price target of $33.11 generates an implied 12% upside, before adding in that 3.5% yield. Cisco shares are valued at less than 12 times forward earnings.
Cisco has so far been a stock buyback king, and its shares are still about 10% shy of its 2007 high. That stock price is still less than half of its all-time back in the tech bubble peak in 2000.
The 52-week trading range here is $22.46 to $31.95, and the market cap is $148 billion.