The Dow Jones Industrial Average ($DOWI), or “The Dow,” remains one of the oldest major indices in the U.S., tracing its origins back to the 19th century. The price-weighted index is a key indicator of investor sentiment, giving a reading on investor optimism or pessimism.
The 30-stock index, which consists of heavyweight names from sectors as diverse as technology to financials to healthcare, has gained about 15% on a year-to-date basis. Three index constituents have posted a stark outperformance, and analysts are expecting this strong showing to continue in the new year as well.
Nvidia
We begin our list of Dow outperformers with AI poster-child Nvidia (NVDA). Founded in 1993, Nvidia is a leader in specialized AI semiconductors. The company designs and sells graphics processing units (GPUs) for the gaming and professional markets, and system-on-a-chip (SoC) units for the mobile computing market. The company currently commands a gargantuan market cap of $3.4 trillion.
NVDA stock continues to reach new heights, zooming 175% on a YTD basis. As Nvidia emerged as a key player in the chip industry, its revenue and earnings also soared. Over the past 10 years, the company clocked revenue and earnings compound annual growth rates (CAGRs) of 37.84% and 59.72%, respectively.
Nvidia continued on its spree of reporting record quarterly revenues in Q3 2024. Revenue came in at $35.1 billion, beating estimates of $33.2 billion, and earnings per share of $0.81 beat estimates of $0.75. Net cash from operating activities rose to $17.6 billion compared to $7.3 billion in the year-ago period. Overall, Nvidia exited the quarter with a cash balance of $38.5 billion with no short-term debt on its books.
Meanwhile, Nvidia stock remains well-positioned for growth, bolstered by innovations like the Blackwell platform, unveiled in March 2024. Promising up to 25x cost efficiency in AI model training and reduced energy consumption compared to the Hopper architecture, Blackwell production is already underway, with availability planned for 2025. Nvidia is also preparing for the next leap with Rubin, expected in 2025 or 2026. Its CUDA platform, InfiniBand networking, and integrated software tools like Nvidia AI and Omniverse enhance hardware performance and foster customer loyalty, further solidifying its competitive advantage.
Nvidia continues to dominate the GPU market, maintaining a market share exceeding 80%, significantly outpacing competitors Intel (INTC) and Advanced Micro Devices (AMD). Additionally, its Omniverse platform is opening new revenue streams across industries by optimizing 3D projects and enabling virtual world creation. With its integration of generative AI and the OpenUSD framework, the platform allows for more complex and realistic simulations, driving industrial digitization.
Looking ahead, management remains optimistic about sustained growth through 2025 and beyond, fueled by the shift to accelerated computing, the rise of generative AI applications, and strong enterprise and consumer internet demand. Nvidia's chips, pivotal for data centers, edge-to-cloud computing, automotive technology, cryptocurrency mining, and professional applications, position the company as a key player in emerging technologies.
Analysts have assigned an overall rating of “Strong Buy” for the stock with a mean target price of $175.55 which denotes upside potential of about 25.5% from current levels. Out of 43 analysts covering the stock, 36 have a “Strong Buy” rating, 3 have a “Moderate Buy” rating and 4 have a “Hold” rating.
Walmart
Founded by the legendary Sam Walton in 1962, Walmart (WMT) operates a chain of hypermarkets, discount department stores, and grocery stores. It serves customers globally with over 10,500 stores across more than 20 countries, operating under various banners such as Walmart, Sam’s Club, and Asda. Additionally, Walmart has a strong online presence, contributing significantly to its revenue through e-commerce sales. The retail giant currently commands a market cap of about $744.5 billion.
WMT stock has rallied to new highs this year, up 74.8% on a year-to-date basis. Moreover, the outperforming stock is a “Dividend King,” though its share price outperformance means that WMT now offers a relatively modest dividend yield of just 0.91%.
Over the years, Walmart has been a steady performer. Over the past five years, WMT delivered revenue and earnings CAGRs of 3.37% and 2.36%, respectively. Moreover, analysts are expecting Walmart to report forward revenue and earnings growth rates of 5.22% and 24.22%.
Walmart posted blockbuster numbers for the third quarter of fiscal 2025, with both revenue and earnings surpassing estimates. Total revenues of $169.6 billion were up 5.5% from the previous year, as a new revenue stream in the form of advertising grew 28% yearly, while a comparable sales increase of 5.3%, a rise in average ticket sizes, and traffic growth also contributed. Earnings grew 13.7% to $0.58 per share, surpassing the consensus estimate of $0.53 per share. This marked the 10th consecutive quarterly earnings beat from WMT.
Walmart also raised its guidance for 2025. The company now expects net sales to increase by 4.8% to 5.1% (vs 3.75% to 4.75% earlier) and earnings to be between $2.42 to $2.47 per share (vs $2.35 to $2.43 per share earlier).
Walmart is also laying the foundation for its next phase of growth by focusing on digital transformation, e-commerce, advertising, and the expansion of its third-party marketplace. These strategic initiatives have propelled Walmart to become the second-largest e-commerce platform in the U.S. by market share. In the grocery segment, Walmart dominates with nearly 27% market share, well ahead of Amazon’s (AMZN) 18.5%.
Finally, Walmart has been actively leveraging artificial intelligence (AI) and automation to enhance operational efficiency and reduce costs. Recently, the company projected that by year-end, approximately 3,000 of its 4,600 stores will incorporate some level of automation. This advancement is expected to streamline the distribution network and significantly lower operating expenses.
Thus, WMT stock has a “Strong Buy” rating overall from analysts, with a mean target price of $99.02 - representing upside of 6.7% from current price. Out of 36 analysts covering the stock, 29 have a “Strong Buy” rating, 4 have a “Moderate Buy” rating, and 3 have a “Hold” rating.
American Express
American Express (AXP) is third on the list of Dow outperformers in 2024. Initially founded in 1850 as a transporter of goods and valuables, it is now a globally integrated payments company, offering products and services including credit and charge cards, expense management, and travel-related services for consumers and businesses. The company is currently valued at a market cap of $213.8 billion.
The company is a favorite of legendary investor Warren Buffett and has rallied 60% on a year-to-date basis while offering a dividend yield of 0.93%.
American Express has been reliably growing its revenue and earnings over the years, with CAGRs of 6.44% and 5.58%, respectively, over the past 10 years.
Meanwhile, the results for the most recent quarter were marked by yearly growth in both revenue and earnings with the latter surpassing Street estimates as well. Total revenues for the quarter were at $16.6 billion which denoted growth of 8% from the previous year. Earnings per share (EPS) for the quarter came in at $3.49, up 6% from the year-ago period.
On the liquidity front, the company is in a healthy position with impressive cash reserves of about $48 billion, far above its short-term debt levels of about $1.5 billion.
The company's focus on premium products and effective risk management has helped it maintain low write-off rates and strong credit quality, even in a challenging economic environment. In the latest quarter, the company experienced higher uptake from more Millennial and Gen Z consumers accompanied with good international growth. It’s encouraging to see that American Express is seeing traction among younger age cohorts.
American Express’ focus on the dining sector presents another exciting long-term growth opportunity. Despite a projected decline in industry-wide restaurant sales in 2024, the $1 trillion U.S. restaurant and food service market offers significant potential. Younger generations plan to dine out more in 2025, positioning American Express to capitalize on this expanding market.
Analysts have given AXP an overall rating of “Moderate Buy” with a mean target price that has already been surpassed. The high target price of $350 denotes upside potential of about 15.1% from current levels. Out of 28 analysts covering the stock, 8 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, 15 have a “Hold” rating and 3 have a “Strong Sell” rating.
