CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
AMZN will replace WBA in the Dow Jones Industrial Average (DJIA) effective February 26, 2024. The index change was prompted by WMT’s decision to split its stock 3:1, which will reduce WMT’s index weight due to the price-weighted construction of the DJIA. By replacing WBA, the DJIA will increase its exposure to consumer retail, advertising, and cloud computing. AMZN will join MSFT and AAPL as the other Magnificent 7 stocks in the index, which together will comprise about 13% of the DJIA. By weighting, AMZN will rank 17th in the index, while MSFT is 2nd and AAPL is 15th. Our opinion on AMZN shares is Buy, as we believe 2024 will mark the second consecutive year of margin expansion and free cash flow growth, driven by additional retail efficiencies, growth re-acceleration in AWS, and advertising growth (e.g., Prime Video ads). AMZN shares are up about 80% over the last year, but still look undervalued, in our view, trading at a forward EV/EBITDA multiple of just 14x vs. the 12x-30x historical average.