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The Dow Jones Industrial Average finished 2022 down nearly 9%. It delivered a worse negative return only six times over the past 50 years.
Several members of the blue chip index experienced especially sharp sell-offs. But that doesn’t mean that better days aren’t on the way. Here are three Dow stocks down 30% to 55% that are screaming buys for 2023.
Apple (AAPL -1.06%) held up better than most tech stocks throughout much of 2022. However, gravity kicked in during the latter part of the year. Apple’s shares are now down around 30% below the peak level from late 2021.
The biggest problems for Apple relate to macroeconomic issues. High inflation, rising interest rates, and supply chain constraints (all aftereffects of the COVID-19 pandemic) are key factors behind the company’s slowing growth rate.
But it would be a huge mistake to write off Apple’s prospects. Wall Street certainly hasn’t. The consensus 12-month price target for the stock is nearly 40% higher than the current share price.
Analysts no doubt like Apple’s valuation after its steep decline. They almost certainly love the stickiness of the company’s iPhone ecosystem. What really makes Apple stock a screaming buy, though, are the growth opportunities that the company could have in new areas, including augmented reality and digital advertising. The latter appears to be on track to become a $10 billion business for Apple even sooner than expected.
Microsoft (MSFT -2.96%) stock is currently 33% below the high set in late 2021. The tech giant started off last year with its shares declining. The downward trajectory continued throughout most of 2022.
This dismal performance last year stemmed in large part from a slump in worldwide PC shipments. Microsoft generates a significant portion of its total revenue from selling Windows operating systems and other PC software.
However, many analysts think that Microsoft could make a major comeback in the new year. The consensus Wall Street price target for the stock reflects an upside potential in the ballpark of 30%.
This bullish view appears to be justified. Microsoft’s cloud hosting business continues to gain momentum. Sales for its cloud-based productivity software are growing. The company is making an important move into the advertising technology market. It shouldn’t take much good news for Microsoft stock to return to its winning ways in 2023.
It wouldn’t be surprising if Mickey Mouse isn’t as cheerful as he’s been in the past. Shares of Walt Disney (DIS -0.07%) plunged in 2022, marking the second consecutive year of declines. The stock is now down 55% below its previous high.
Disney’s troubles are due in part to the overall economy. Investors also lost enthusiasm for the company’s streaming business as it continues to rack up big losses.
There’s some disagreement on Wall Street about how Disney will perform in 2023. Half of the analysts surveyed by Refinitiv in January recommend buying Disney, with most of the others recommending holding the stock. However, the average price target still reflects an upside potential of nearly 40%.
Disney’s new ad-supported model for Disney+ could jump-start its biggest growth engine in 2023 and beyond. The company also has several likely blockbuster movies on the way this year, including Guardians of the Galaxy Vol. 3 and a live-action version of The Little Mermaid. Look for Disney’s stock performance to avoid a third year of disappointment.
Keith Speights has positions in Apple, Microsoft, and Walt Disney. The Motley Fool has positions in and recommends Apple, Microsoft, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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