Blue-chip companies are typically industry leaders with strong financials and cash balances, which affords their stock some stability even during an economic downturn. Such businesses have pricing power and are considered safe investment bets amid market volatility.

Last month, the major market indexes suffered wild price swings, which resulted in the Dow Jones Industrial Average (DJIA) slipping 3.3% in January. The S&P 500 and the Nasdaq 100 fell 5.3% and 8.9%, respectively, marking their worst monthly performance since March 2020. The volatility in January was due largely to the Fed’s decision to increase interest rates multiple times this year and rising geopolitical tensions. According to BofA Securities’ U.S. head of equity and quantitative research, Savita Subramanian, “It’s going to be a year where we are shocked by the volatility.” But blue-chip companies have a long track record of providing attractive returns and a regular flow of income in the form of dividends.

Given this backdrop, we think it could be wise to add blue-chip stocks The Walt Disney Company (DIS) and The Boeing Company (BA) to one’s watchlist. Wall Street analysts expect these stocks to rally more than 20% in price the near term.

The Walt Disney Company (DIS)

Famous entertainment company, DIS, which is headquartered in Burbank, Calif., operates through four segments: media networks; parks, experiences, and products; studio entertainment; and Direct-to-consumer and international. It engages in film and episodic television content production and distribution and operates television broadcast networks under the ABC, Disney, and ESPN brands.

On Nov.24, 2021, DIS announced in its annual report that it plans to increase its overall spending on content to $33 billion for its fiscal year 2022, which is almost $8 billion more than what DIS spent in fiscal 2021. It intends to spend more on expanding its reach by streaming through its platforms Disney Plus, Hulu, and ESPN Plus.

DIS’ revenues increased 26% year-over-year to $18.53 billion for its fourth fiscal quarter, ended Oct. 2, 2021. The company’s cash provided by continuing operations increased 58% year-over-year to $2.63 billion. Also, its free cash flow increased 62% year-over-year to $1.52 billion. In addition, its non-GAAP EPS came in at $0.37, compared to a  $0.20 loss.

Analysts expect DIS’ EPS and revenue for its fiscal 2022 to increase 89.1% and 25.3%, respectively, year-over-year to $3.82 and $74.36 billion, respectively. Over the past nine months, the stock has declined 22.3% in price to close the last trading session at $144.49. However, Wall Street analysts expect the stock to hit $194.05 in the near term, indicating a potential 34.3% upside.

The Boeing Company (BA)

BA is a Chicago-based aerospace company that designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide. The company operates through the Commercial Airplanes, Defense, Space and Security, Global Services, and Boeing Capital segments.

On Jan. 21, 2022, BA announced that it had signed an agreement with the Ministry of Defense (MOD) to provide long-term training, support, and sustainment for the British Army’s fleet of 50 Apache AH-64E helicopters. BA will work closely with the British Army to provide maintenance and engineering support, supply chain, and logistics management under the $348 million Long Term Training and Support Services (LTTSS) contract. The new agreement will run until 2040, and BA will deliver aircrew and maintainer training from its advanced facility at Middle Wallop.

For its fiscal year ended December 31, 2021, BA’s revenue increased 7% year-over-year to $62.28 billion. The company’s total costs and expenses for the fiscal fourth quarter ended Dec.31, 2021, decreased 17.5% year-over-year to $17.30 billion, while its free cash flow came in at $494 million, compared to a negative $4.27 billion free cash flow in the year-ago period.

For its fiscal 2023, BA’s EPS is expected to increase 137.4% year-over-year to $7.43. Its revenue for fiscal 2022 is expected to increase 31.9% year-over-year to $82.15 billion. Over the past year, the stock has gained 6.3% in price to close the last trading session at $208.34. However, Wall Street analysts expect the stock to hit $261.06 in the near term, indicating a 25.3% potential upside.

DIS shares were trading at $142.67 per share on Wednesday afternoon, down $1.82 (-1.26%). Year-to-date, DIS has declined -7.89%, versus a -3.71% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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