The Dow Jones Industrial Average is having a banner year compared to any of the S&P 500 or the Nasdaq Composite, down 11% year to date compared to losses of 14% and 22%, respectively, for other indexes. While those two are in official bear market territory (and the Nasdaq still is), the Dow has never been that low.
However, that is not the case for its various parts. Nearly one-third of the Dow 30 stocks are down 20% or more so far in 2022, and with the possibility that the economy may soon be officially declared in a recession, let’s see if the three worst performing stocks in the index are worth buying at their low prices.
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Salesforce
Customer relationship management specialist Salesforce (CRM -2.22%) has lost nearly 35% of its value this year, although it will fall before the start of 2022 as economic conditions begin to sour both in the US and abroad.
While revenue continues to grow — and Salesforce seems to continue to surprise the market with its resilience — it’s not growing at the same rate as the business matures, and investors worry about the impact of a global slowdown. -shrink operations. The cloud-based software giant had to adjust its full-year guidance in June with the strength of the US dollar affecting companies with significant international exposure.
With Salesforce generating a third of its revenue from foreign markets, it now expects revenue to rise 17% for the year compared to its previous forecast of 20% growth adjusted for currency changes — down slightly from its forecasts of 21% growth made in March.
Co-CEO Marc Benioff still maintains that Salesforce is on track for $50 billion in annual sales by fiscal 2026, a long-range planning goal first made two years ago when the cloud company rising higher. It may still be possible, but industry peers want it Service Today and work day also brought back their views and it may become more difficult for Salesforce to swim against the tide.
Nike
Nike (NKE -1.31%) was the second-worst performing stock in the Dow, with losses of just over 35% as sales weakened to the point where they grew just 3% last quarter on a neutral basis. Consumer spending is slowing and that’s leading to a buildup in inventories, which rose 23% for the period. Nike says that means it will have to be more promotional to get its merchandise off the ground.
Its downsizing promises weaker revenue and margins for the coming fiscal quarter, and perhaps year, and they have already contracted across the board. Nike, however, is increasingly pushing its direct-to-consumer model to keep sales high, but that is taking pressure from higher transportation costs.
However, Nike is the most valuable apparel brand in the world, according to Brand Finance, and has been since the consultancy began tracking such values. That means that while the stock trades at 29 times trailing earnings, 23 times next year’s estimates, and 68 times its free cash flow, it probably deserves a bit of a premium. compared to the competition. It’s debatable that it’s worth it, however, and investors may have to wait to see if a global economic recession that really hurts consumers still persists.
Intel
That was just in August Intel‘s (INTC -1.05%) performance deteriorated so much that it became the worst performing stock in the Dow Jones Industrial Average. Not that the chipmaker was doing well at any point in the year, but after the company delayed the launch of its desktop graphics cards until the third quarter, the stock really fell off the table.
However, Intel has fared slightly worse than Nike, with shares down 35.1% year to date, and has nowhere to go but up in a market dominated by Nvidia and Advanced Micro Devices, it should see improvement — eventually. However, investors need to question how much it can do in the space, unless it can come in at lower prices to attract buyers, even if that could limit profits.
Like many other businesses, the rest of Intel’s business is suffering from supply chain snarls and the ongoing issues of COVID-19-related lockdowns in China, but also its own missteps. move, which led the chipmaker to miss Wall Street estimates last quarter and dramatically. lower revenue guidance for the year.
But unlike either Salesforce or Nike, the semiconductor stock is priced at a real discount, trading at seven times trailing earnings, 12 times next-year estimates, and a bargain-basement nine times the free cash flow it generates. Of the three, only Intel can be safely considered a buy.
Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Nike, Nvidia, Salesforce, Inc., ServiceNow, Inc., and Workday. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.