From the stock market’s bottom in March 2020, the Dow Jones Industrial Average has more than doubled in value. The 114% gain is all the more remarkable because the venerable index is price-weighted. That means higher-priced stocks will affect the movement of the index more than lower-priced stocks.
It takes a lot more for a $100 stock to go to $200 than for a $10 one to rise to $20, even though it’s the same percentage increase. Think of it like a cruise ship making a turn on the ocean versus a rowboat. One will need large, sweeping curves to turn around, while the other can nimbly reverse course.
The index is up 5.6% in 2024 and closed out last week at a new all-time high. However, not every stock on the Dow is enjoying the same sort of success. Of the 30 Dow components, 40% are trading below the index’s gains so far this year. The three companies below are the Dow’s worst-performing stocks. Let’s see if they have what it takes to go from worst to first.
Intel (INTC)
Where Advanced Micro Devices (NASDAQ:AMD) is up 22% year-to-date and Nvidia (NASDAQ:NVDA) is rocketing 80% higher, rival chipmaker Intel (NASDAQ:INTC) is down in the dumps 12% after posting disappointing guidance.
Despite solid fourth-quarter earnings, Intel is late to the game on artificial intelligence (AI). It is also running into stronger-than-usual seasonal headwinds and inventory issues. The chipmaker is seeing customers chase after AI accelerators such as those produced by Nvidia rather than the traditional server CPUs Intel makes. So even though Intel expects Q1 revenue to rise 8% year over year, the forecasted range of $12.2 billion to $13.2 billion is an 18% sequential decline at the midpoint. That’s likely to cause gross margins to take a hit.
Intel should grow this year; it’s just not going to be the sort investors expect from semiconductor stocks.
Even coming up short so far this year, INTC stock is not attractively priced. At 19 times next year’s earnings, it might seem discounted compared to NVDA or AMD. Yet at nearly three times sales and 2.5x estimated long-term earnings growth rates, the chipmaker is not the bargain it seems. The stock may go higher, but I wouldn’t expect it to go from zero to hero.
Nike (NKE)
Athletic apparel maker Nike (NYSE:NKE) is in a similar position as increased competition in core markets. Shares are down 13% year to date and are 20% lower than a year ago.
Nike’s strategy of focusing on direct-to-consumer channels while cutting out many wholesale accounts hasn’t worked out quite as expected. Moreover, its premier position atop the athletic footwear market is suddenly challenged by surprisingly strong upstarts such as Swiss sporting goods company On Holding (NYSE:ONON), whose trendy footwear has captured consumer attention.
China is also important for Nike, but the slowing economy, support for local footwear makers and concerns over forced factory labor are headwinds. That might be changing, though. Fiscal third-quarter earnings showed currency-adjusted sales up 6% in China and are 8% higher there for the first nine months.
Nike remains the No. 1 sports brand on Alibaba‘s (NYSE:BABA) Tmall platform, but the site is experiencing less growth. The apparel company is just getting onto the Douyin social commerce site owned by TikTok parent ByteDance, so there is a runway for opportunity there.
Trading at historic lows for sales and earnings, Nike has a good chance to run higher. It remains the global market share leader and should benefit from its position.
Boeing (BA)
Aircraft manufacturer Boeing (NYSE:BA) has lost a quarter of its value this year and is trading near its 52-week lows. A string of high-profile disasters triggered a significant regulatory backlash. Now, all of the aircraft’s manufacturing practices are under a microscope.
Early last month, the Federal Aviation Administration (FAA) found multiple instances where Boeing and parts supplier Spirit AeroSystems (NYSE:SPR) failed to comply with manufacturing quality control requirements. Yet most Boeing 737-9 MAX aircraft are now back in service. The FAA, however, still has further production of planes that have shut down. The company’s CEO also announced he would step down at the end of the year.
Indeed, the near-term optics of BA stock don’t look good. It needs to get beyond the crisis and the feeling from air travelers that “if it’s Boeing, I’m not going.” Yet the company is a major aerospace and defense contractor, too. With a backlog of plane orders, forecasts of global travel growth and the fact that Boeing is the only major domestic plane manufacturer, it will gain altitude once again. The stock may fall further before growing, but the long-term outlook remains positive.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
