3 Blue-Chip Stocks That Are at Risk of Downgrades (2024)

Blue-chip stocks offer investors the opportunity to generate stable returns. Most of these stocks are household names that can weather economic uncertainty better than high-growth stocks.

However, some stocks hold the designation of “blue-chip” for a bit too long. Just because a company is well-known doesn’t guarantee its stock will go up over the years. Some companies that were reliable picks years ago ended up hurting long-term investors.

Some blue-chip stocks are better than others, but these three companies look like duds at risk of receiving downgrades.

Disney (DIS)

3 Blue-Chip Stocks That Are at Risk of Downgrades (1)

Source: chrisdorney / Shutterstock

It’s not a stretch to say that the company is in an existential crisis. The company islosing big on streamingand haslower growth ratesfor its platforms.

The company rewarded investors in the 2010s as its acquisitions paid off. However,Disney(NYSE:DIS) has destroyed much of the goodwill from franchises like Lucasfilm and Marvel. Consumers are fatigued with these brands, and Disney CEO Bob Iger evenadmitted to this in August.

Disney has released a string of flops in recent years.The Marvelsiswidely expected to be another flop. Investors have taken notice, and Disney shares trade at the same levels as they did in 2014.

Disney has been relying on nostalgia for years. The corporation has focused on more acquiring popular brands than innovating in the space. Asfewer people careabout where these iconic franchises go next, Disney stock faces an uphill battle.

Theme parks are a major revenue driver for the company, but higher prices can keep more people out of the parks. Disney barely posted year-over-year revenue growth in the most recent quarter, and economic pressure can result in declining revenue growth in the future.

Thecomments from this articlehighlight how much it costs to go to a Disney Theme Park. One commenter mentioned that a week at Disney is just as expensive as a month in Poland. Another commenter visited London, Paris, Rome and Athens for two weeks. It cost this commenter just as much for a one-week trip to Disney World.

The value proposition isn’t there at the current price points. The continued streak of flops and macroeconomic conditions can lead to more losses and a stock downgrade.

Target (TGT)

3 Blue-Chip Stocks That Are at Risk of Downgrades (2)

Source: jejim / Shutterstock.com

It’s no secret thatTarget(NYSE:TGT) is in trouble. The company makes most of its revenue from discretionary spending which will go down as student loans and high inflation continue to weaken consumers.

Target shares have declined by 25% year-to-date.Revenue dropped by 4.9% year-over-yearin the second quarter, and ominous comments from Target’s CEO suggest worsening conditions.

CEO Brian Cornell went on CNBC and mentioned that consumers arepulling back on groceries. That’s one of the last expenses people will cut. Many consumers will cut their other expenses first before reducing their grocery bills.

However, this cut is happening, and it’s easy to imply that consumers have made larger cuts to their discretionary spending. While this can be exclusive to Target, this problem is likely across the board.

This development doesn’t suggest a good reception when Target reports earnings on November 15. Target’s dividend yield is close to 4%, but that doesn’t necessarily make it a buy. Target briefly fell below $103/share in October. It seems likely that shares will head back in that direction.

AT&T (T)

3 Blue-Chip Stocks That Are at Risk of Downgrades (3)

Source: Lester Balajadia / Shutterstock.com

AT&T(NYSE:T) has been a poor-performing stock that only attracts investors for its high dividend yield. Shares are trading at the same level as they did in 1993. Shares currently have a 7% dividend yield, but it’s not likely to last for long.

AT&T had tocut its dividend in 2022, and another dividend cut seems to be around the corner.Revenue only crept up by 1%year-over-year and net income dropped by 42% year-over-year.

AT&T has more than $51.7 billion in current liabilities compared to $35.6 billion in current assets. That large gap means AT&T will have to continue refinancing its debt and get stuck with higher interest rates. It’s not a good look for a company that cut its dividend in 2022 and has punished long-term investors with significant losses.

AT&T stock is down by 31% throughout the past five years. The stock’s 15% year-to-date decline doesn’t suggest a recovery is on the way.

On the date of publication, Marc Guberti did not have (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 theInvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

5G, Communications, Consumer Discretionary, Retail, Media, Streaming

Blue-Chip Stocks

3 Blue-Chip Stocks That Are at Risk of Downgrades (2024)

FAQs

What are the risks of blue chip stocks? ›

Market Volatility: Although Blue Chip stocks are less volatile than smaller-cap firms, market movements can nevertheless harm them. Economic Downturns: Even Fortune 500 corporations are not immune to economic downturns. The value of their stock may fall during severe economic downturns.

What are blue chip stocks Why are they considered to be lower in risk than other stocks? ›

A blue-chip stock comes from a well-established company with consistently strong performance. These stocks have a long history of paying dividends and increasing their market share. Blue-chip stocks also tend to be resilient when markets take a dip.

Why are blue chip stocks low risk? ›

Low Risk: As industry leaders with reliable cash flows and long histories of paying their debts, blue chip companies are considered to be low risk.

Is Apple considered a blue chip stock? ›

Here are three blue-chip stocks to buy at a 52-week low in April. Apple (AAPL): The consumer electronics giant's stock is now negative over the last 12 months. Boeing (BA): The aircraft manufacturer's share price is likely to slide lower after its upcoming Q1 earnings.

Which blue-chip stocks have fallen the most? ›

Blue Chip* Top Losers of Indian Stocks
NameSymbol% Loss
Bajaj FinanceBAJFINANCE-10.37
Zee Entertainment Enterprises Ltd.ZEEL-8.51
Bajaj Finserv Ltd.BAJAJFINSV-6.82
Godrej Consumer Products Ltd.GODREJCP-6.41
43 more rows

Which bluechip stock is best? ›

List of Best Blue Chip Stocks
  • Reliance Industries Ltd. Conglomerate.
  • Tata Consultancy Services Ltd. Information Technology.
  • Infosys Ltd. Information Technology.
  • HCL Technologies Ltd. Information Technology.
  • Hindustan Unilever Ltd. Fast-Moving Consumer Goods.
  • ITC Ltd. ...
  • Nestle India Ltd. ...
  • HDFC Bank Ltd.
7 days ago

Is Coca Cola a blue chip stock? ›

Some examples of blue chip stocks are Coca Cola, Apple, IBM, American Express, McDonalds, DuPont, and American Express.

Is Amazon a blue chip stock? ›

These blue-chip stocks will continue to provide market-beating returns in April. Amazon Inc (AMZN): This tech behemoth is firing on all cylinders following its highest-ever monthly close. Netflix Inc (NFLX): The streaming giant is bolstering up its lineup with newly added premium tiers.

Is Tesla a blue chip stock? ›

The problem is that despite being included in blue chip ETF indexes, companies like Nvidia and Tesla aren't truly blue chip stocks, George Pearkes, an analyst at Bespoke, told CNN. They're much more volatile.

Is McDonald's a blue chip stock? ›

Blue-Chip Stocks to Buy: McDonald's (MCD)

The hamburger and restaurant chain has been a reliable performer for decades, trades at a reasonable 24 times future earnings estimates, and pays a quarterly dividend that yields a strong 2.40%. McDonald's (NYSE:MCD) has raised its dividend payment every year since 1976.

Is Google a blue chip stock? ›

Alphabet (GOOG, GOOGL): Alphabet's non-search AI potential makes it a must-own blue chip for the long haul.

What are the 3 major stock indexes in the US? ›

For the year: The S&P 500 is up 241.29 points, or 5.1%. The Dow is up 85.84 points, or 0.2%. The Nasdaq is up 590.15 points, or 3.9%.

Which stock will boom in 2024? ›

Best Stocks to Invest in India 2024
S.No.CompanyIndustry/Sector
1.Tata Consultancy Services LtdIT - Software
2.Infosys LtdIT - Software
3.Hindustan Unilever LtdFMCG
4.Reliance Industries LtdRefineries
1 more row
Apr 9, 2024

Is Costco a blue-chip stock? ›

By investing in blue-chip stocks, investors can build a well-diversified portfolio. Here, we have identified three stocks from the Retail - Wholesale sector — Walmart Inc. WMT, The Home Depot, Inc. HD and Costco Wholesale Corporation COST.

Is Home Depot considered a blue-chip stock? ›

Fundamentally, Home Depot (NYSE:HD) ranks among the best blue-chip stocks because of its vast relevancies. No matter the situation, everyone eventually finds themselves needing home repair solutions.

Are blue chip funds risky? ›

Lower Risk Compared to Other Mutual Funds: Blue Chip Mutual Funds are often considered lower in risk compared to other types of mutual funds. Such as small-cap or sector-specific funds. Their investments in large, well-established companies can mitigate the potential for extreme market volatility.

Is it safe to invest in blue-chip stocks? ›

Blue-chip stocks are high-quality stocks of well-established companies that have a proven track record of financial stability and consistent growth. The best blue chip stocks to buy are considered safe and reliable investments, making them a popular choice for long-term investors.

Are blue-chip stocks a good investment now? ›

Blue chip companies have solid business models and impressive track records of returns for investors. These returns often include regular and growing dividend payments. The blue chip stocks' attractive risk-reward profiles make them among the most popular for conservative investors.

Are blue-chip stocks stable? ›

While they may not generate sky-high returns, blue chips provide the resilience and predictability that risk-averse investors prize. Specifically, blue-chip companies possess wide economic moats, formidable brands and savvy management teams that steer steady growth.

Top Articles
Latest Posts
Article information

Author: Aracelis Kilback

Last Updated:

Views: 5709

Rating: 4.3 / 5 (64 voted)

Reviews: 95% of readers found this page helpful

Author information

Name: Aracelis Kilback

Birthday: 1994-11-22

Address: Apt. 895 30151 Green Plain, Lake Mariela, RI 98141

Phone: +5992291857476

Job: Legal Officer

Hobby: LARPing, role-playing games, Slacklining, Reading, Inline skating, Brazilian jiu-jitsu, Dance

Introduction: My name is Aracelis Kilback, I am a nice, gentle, agreeable, joyous, attractive, combative, gifted person who loves writing and wants to share my knowledge and understanding with you.