On Thursday, Evercore ISI updated its outlook on Amazon.com (NASDAQ:AMZN), raising the stock's price target from $225 to $240 and maintaining an Outperform rating. The firm's analysis highlighted Amazon's intensified efforts and potential growth in its Prime Video service, noting significant content expansion, including more NFL games, a WildCard Playoff game, 66 NBA games in the 2025 season, and exclusive broadcasting rights to the 2024 PPA World Championships.
The report emphasized the company's strategic move to increase advertising as a revenue stream. Amazon CEO Andy Jassy, in the Q2 earnings call, pointed out the $50 billion revenue run rate from advertising and hinted at the early stages of Amazon's capabilities in video advertising. This was marked by Amazon's debut at the Upfronts, a series of meetings where television networks preview their upcoming shows to advertisers.
According to Evercore ISI, channel checks indicate that Amazon has started to increase advertising loads on Prime Video in the second half of the year. The firm has updated its Amazon Prime Video (APV) monetization analysis, which includes an interactive model projecting incremental revenue and profit scenarios from APV through advertising and subscriptions.
The analysis forecasts that APV could contribute between $3.0 billion and $5.9 billion in total revenue in 2025, which would account for 3% to 9% incrementality to the projected $56 billion Amazon Ad Revenue estimate for 2024. This potential increase in revenue is expected to accelerate ad revenue growth to 20% in 2025, following a 19% growth in 2024.
Furthermore, the firm estimates that APV could generate between $1.8 billion and $3.3 billion in operating income in 2025, representing 3% to 5% incrementality to the projected total Amazon operating income of $61 billion for 2024. The report suggests that the ramp-up in APV monetization could be a driving force for continued operating margin expansion for Amazon into 2025 and beyond.
In other recent news, Amazon's annual seller conference, Amazon Accelerate, has led BMO Capital to maintain its Outperform rating on the company's shares. The e-commerce giant showcased various fulfillment and advertising initiatives designed to increase revenue and reduce shipping costs.
Amazon also announced an investment exceeding $2.2 billion to raise the pay of its hourly employees in fulfillment and transportation sectors across the U.S. Meanwhile, Samir Kumar has been appointed as the new head of Amazon's India operations, a crucial step as the company expands in the Indian market amidst regulatory scrutiny. BofA Securities also maintained a Buy rating on Amazon stock, following a significant partnership between Amazon Web Services and Intel (NASDAQ:INTC).
Mastercard (NYSE:MA) has forecasted a 3.2% increase in U.S. retail sales during the upcoming holiday season, with online sales projected to see a significant 7.1% jump. The electronics sector, in particular, is expected to benefit with a 6.7% increase in sales.
These are recent developments in the business landscape, providing a snapshot of Amazon's strategic moves and the broader retail and e-commerce trends. As Amazon continues to strengthen its market position, analysts from BMO Capital and BofA Securities have expressed confidence in the company's forward momentum.
However, regulatory challenges in markets like India and Europe are also part of the ongoing narrative.
InvestingPro Insights
As Amazon (NASDAQ:AMZN) garners attention for its potential growth in Prime Video service, InvestingPro data underscores the financial muscle backing these strategic moves. With a market capitalization of $1.99 trillion and an impressive revenue growth of 12.32% over the last twelve months as of Q2 2024, Amazon's scale and financial health remain robust. The company's ability to generate $290.34 billion in gross profit with a margin of 48.04% during the same period reflects its operational efficiency.
InvestingPro Tips suggest that Amazon is trading at a low P/E ratio relative to near-term earnings growth, which may appeal to value-oriented investors. Additionally, analysts predict the company will be profitable this year, backed by a history of profitability over the last twelve months and a high return over the last decade. These factors, coupled with Amazon's status as a prominent player in the Broadline Retail industry, provide context to Evercore ISI's optimistic outlook.
For readers interested in a deeper dive, InvestingPro offers more tips on Amazon's financial metrics and future prospects. Currently, there are 11 additional InvestingPro Tips available, which can be found at https://www.investing.com/pro/AMZN, offering a comprehensive view of the company's financial landscape.
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