The Dow Jones Industrial Average is having a banner year compared to either the S&P 500 or the Nasdaq Composite, down 11% year to date compared to losses of 14% and 22%, respectively, for the other indexes. While those two have been in official bear market territory (and the Nasdaq still is), the Dow never got that low.
That’s not the case for its various components, however. Nearly one-third of the Dow 30 stocks are down 20% or more so far in 2022, and with the possibility the economy may soon be officially declared in a recession, let’s see whether the three worst-performing stocks in the index are worth buying at their depressed prices.
Customer relationship management specialist Salesforce (CRM -2.00%) has lost almost 35% of its value this year, though it was sliding well before 2022 began as economic conditions began to sour both in the U.S. and abroad.
While revenue continues to grow — and Salesforce seems to continue surprising the market with its resilience — it’s not growing at the same rate as the business matures, and investors worry about the impact a global recession will have on operations. The cloud-based software giant had to adjust its full-year guidance in June on the strength of the U.S. dollar impacting 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 versus its previous forecast of 20% growth adjusted for currency fluctuations — down slightly more from its predictions of 21% growth made back in March.
Co-CEO Marc Benioff still maintains Salesforce is on track for $50 billion in annual sales in fiscal 2026, a long-range planning goal initially made two years ago when the cloud company was soaring higher. It may still be possible, but industry peers like ServiceNow and Workday have also pared back their outlooks and that may make it more difficult for Salesforce to swim against the tide.
Nike (NKE -0.78%) is the second-worst performing stock on the Dow, with losses of just over 35% as sales have weakened to the point where they grew just 3% last quarter on a currency 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 need to be more promotional to get rid of its merchandise.
Discounting its gear promises weaker profits and margins for the coming fiscal quarter, and perhaps year, and they were already contracting across the board. Nike, though, has been increasingly pushing its direct-to-consumer model to keep sales as elevated as they are, but that’s getting pressure from higher transportation costs.
Still, Nike is the world’s most valuable apparel brand, 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 the free cash flow it produces, it probably deserves a bit of a premium compared to the competition. It’s debatable it’s worth that much, though, and investors may want to wait to see whether a global economic recession that really pinches consumers hard is still in the works.
It was only in August that Intel‘s (INTC -1.19%) 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 during 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.
Yet Intel is only marginally worse than Nike, with shares down 35.1% year to date, and with nowhere to go but up in a market dominated by Nvidia and Advanced Micro Devices, it should see improvement — eventually. Still, investors need to question just how much of a dent it can make in the space, unless it can break in at a lower price point to attract buyers, though that might also 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, which led the chipmaker to badly miss Wall Street estimates last quarter and dramatically lower revenue guidance for the year.
Yet unlike either Salsforce or Nike, the semiconductor stock is priced at a real discount, trading at seven times trailing earnings, 12 times next year’s estimates, and a bargain-basement nine times the free cash flow it produces. Of the three, Intel is the only one that could safely be 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.