The Dow Jones Industrial Average (DJINDICES: ^DJI) has only risen 4% this year, compared to the S&P 500's 15% gain and the Nasdaq-100's 17% return. The Dow underperformed the other two major indexes for two main reasons: It only tracks 30 prominent companies, and it's more heavily weighted toward slower-growth industries. It's also a price-weighted index, which arguably makes its less accurate than a market cap-weighted index like the S&P 500 and the Nasdaq-100.
Nevertheless, the 30 companies of the Dow -- which are also included in the S&P 500 -- still represent a good starting point to look for stable blue chip stocks. So today, I'll highlight three of those stalwarts that are set to soar in 2024 and beyond: Amazon (AMZN +1.23%), Walmart (WMT 1.60%), and IBM (IBM +1.67%).
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1. Amazon
Amazon is the world's largest e-commerce and cloud infrastructure company. In 2022, its revenue only rose 9% as macro headwinds throttled the growth of its marketplace and cloud businesses. Its investment in the struggling EV maker Rivian also backfired and caused Amazon to post a net loss for the full year.
NASDAQ: AMZN
Key Data Points
That slowdown spooked a lot of investors. But in 2023, its revenue rose 12% as it returned to profitability. That acceleration was driven by the stabilization of its North American and international retail divisions, faster delivery speeds, its expansion into higher-growth overseas markets, and the growth of its integrated advertising business. Its cloud unit, which usually subsidizes its lower-margin retail segment with higher-margin revenue, recovered as more companies upgraded their infrastructure to support bigger workloads, large language models, and new generative AI applications.
Analysts expect Amazon's revenue and earnings to grow 11% and 57%, respectively, this year. Its stock still looks reasonably valued at 40 times forward earnings, and it could head a lot higher as the macro environment improves.
2. Walmart
Walmart is one of the few brick-and-mortar retail giants that has consistently kept up with Amazon. It accomplished that by expanding its e-commerce marketplace, turning its stores into fulfillment centers for online orders, matching Amazon's prices, and rolling out its own Walmart+ subscription plans to counter Amazon Prime.
NYSE: WMT
Key Data Points
Walmart also competes against Costco in the warehouse retail market with Sam's Club, and it operates additional banners and e-commerce sites across 19 other countries. That makes it a lot more diversified than many U.S. retailers.
In fiscal 2024 (which ended this January), Walmart's revenue and adjusted EPS both increased 6%. For fiscal 2025, analysts expect its revenue and adjusted EPS to grow 4% and 9%, respectively, as its domestic business recovers and its international business expands. The company's stock still seems reasonably valued at 28 times forward earnings, it pays a decent forward dividend yield of 1.2%, and it's in better shape than most of its competitors.
3. IBM
IBM was once considered a dinosaur of the tech industry that had fallen far behind its nimble cloud-based peers. But the company divested its slower-growth managed infrastructure services unit as Kyndryl in late 2021, expanded its subsidiary Red Hat to develop more hybrid cloud services, and rolled out more AI features.
NYSE: IBM
Key Data Points
By streamlining its business and expanding higher-growth hybrid cloud and AI businesses, IBM started to grow again. In 2023, revenue and adjusted EPS rose 2% and 5%, respectively, even as the cloud market faced tough macro headwinds. In 2024, analysts expect its revenue and adjusted EPS to increase 2% and 3%, respectively.
Those growth rates might seem anemic, but they mark a massive improvement from previous years of revenue declines. IBM stock looks cheap at 17 times forward earnings, and its high forward dividend yield of 3.9% should limit its downside potential. Over the long term, its stock could head a lot higher as its hybrid cloud and AI businesses accelerate.
