Macro

Dow Hits 40K: AMZN, CVX Lead with Upside Potential

Dow reaches 40,000 on easing inflation, with stocks like Amazon and Chevron poised for growth, trading below 5-year P/E averages.

By Bill Bullington

5/16, 12:04 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Amazon.com, Inc.
Chevron Corporation
Delta Air Lines, Inc.
United Airlines Holdings, Inc.
Western Digital Corporation
Walmart Inc.
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Key Takeaway

  • Dow reaches 40,000 milestone; stocks like Amazon (AMZN) with a 22% upside and Chevron (CVX) with a 14.2% upside offer growth at below historical P/E ratios.
  • Visa (V) and Walmart (WMT) also highlighted for affordable valuations and potential gains of over 10%, despite the market's overall rise.
  • Analysts remain bullish on these Dow components, citing factors like e-commerce growth for Amazon and Visa's scalable network.

Dow Hits 40,000 Amid Inflation Easing

The Dow Jones Industrial Average reached a significant milestone, touching the 40,000 mark, buoyed by April's consumer price index data indicating a slight ease in inflation. This positive development has fueled expectations of interest rate cuts, propelling the Dow up by 5.9% in May and 6.2% year to date. Despite these gains, analysis using the CNBC Pro Stock Screener Tool reveals that there are still inexpensive growth opportunities within the index, with certain stocks trading below their 5-year average forward price-to-earnings (P/E) ratios and analysts projecting at least 10% upside.

Growth Opportunities in Dow Components

Among the Dow components identified as having growth potential are Amazon, Chevron, Visa, and Walmart, each trading at valuations suggesting room for growth. Amazon, for instance, trades at a forward P/E of 42.9, significantly below its five-year average of 70.8, with analysts forecasting nearly 22% gains. Chevron, with a forward P/E of 12.6 compared to its five-year average of 17.8, has seen an 8.2% increase in 2024, albeit lagging behind the S&P 500 energy sector's 11.9% rise. Visa and Walmart also present opportunities, with analysts optimistic about Visa's "hard-to-replicate network" and Walmart's e-commerce growth and appeal to high-income shoppers.

S&P 500 and Nasdaq Hit All-Time Highs

Despite the Dow's impressive performance, the S&P 500 and Nasdaq Composite have rallied to all-time highs, driven by the lighter-than-expected April consumer inflation report. This rally has not only highlighted the market's resilience but also underscored the presence of undervalued stocks with significant upside potential. Stocks like Delta Air Lines, United Airlines, and Western Digital have outperformed, with analysts pointing to recovery in corporate travel and strong demand for international vacations as key drivers for airlines, and stronger semiconductor pricing benefiting Western Digital.

Street Views

  • Deutsche Bank (Bullish on Amazon):

    "Primed for a breakout."

  • Piper Sandler (Bullish on Visa):

    "Bullish on Visa’s scale, 'hard-to-replicate network' and sustainable secular growth story."

  • DA Davidson (Bullish on Walmart):

    Called the stock a “best-in-class” name.