Analyst revises Amazon stock price target on ad estimates

Will Rogers once said that advertising is the art of getting people to spend money they don’t have on something they don’t need.

Fans of “The Boys” may disagree. I just love Amazon (AMZN) The main series about a gang of corrupt superheroes, which was the No. 1 streaming show. 1 for the week ending August 4th

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The show’s fourth season is now Prime Video’s fourth-most-watched TV season of all time, Variety reported, coming in behind “Lord of the Rings: The Rings of Power” Season 1, “Fallout” Season 1 and “Reacher” Season 2. “The Boys” has been renewed for a fifth and final season.

“Our storytelling resonates with our hundreds of millions of monthly viewers around the world,” Andrew Jassy, ​​Amazon’s chairman and CEO, told analysts during the company’s second-quarter earnings call on Aug. 1.

“Combined with our original movies and shows, partnered streaming services, licensed content and rental or purchase of titles, Prime Video continues to evolve into the best destination for video streaming,” said Jassy.

Analysts see potential in Amazon Prime advertising.

Amazon Prime

Amazon’s CEO sees “an exciting opportunity” in Prime

An Evercore ISI survey of 1,100 Amazon Prime members found that 61% of respondents who chose from multiple options chose Prime Video as their top reason for subscribing, while 73% chose the shipping benefit, IndiWire reported in June.

In the last three years of the survey, free shipping was over 80%, while Prime Video was around 45%.

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This kind of popularity translates into lots of eyeballs along with potential clients for advertisers.

“With ads and Prime Video, the exciting opportunity for brands is the ability to directly connect advertising that has traditionally focused on raising awareness, such as TV, with a commercial outcome such as product sales or subscription sign-ups ”, Jassy. said.

“We’re able to do this through our measurement and ad technology, so brands can continually improve the relevance and performance of their ads.”

While ads have become the norm for streaming video, Jassy said, Amazon aims to “have significantly fewer ads than linear TV and other streaming-TV providers.”

Amazon, which launched ads in Prime Video content for US customers on January 29, offers ad-free viewing for $2.99 ​​a month.

Brian Olsavsky, CFO, said “advertising remains an important contributor to profitability in North America and international segments.”

“And we saw strong growth on an ever-increasing revenue base this quarter,” he said. “We continue to see opportunities to expand our offering in areas that drive growth today, such as sponsored products, as well as newer areas such as Prime Video advertising.”

Jassy noted that “sponsored ads drive the majority of our advertising revenue today, and we see new opportunities there.”

Analysts see potential in advertising

In May, Amazon made its first appearance at upfronts, a gathering of television network executives and major advertisers and media where marketers can buy months of commercial airtime before the start of the TV season.

“We are encouraged by agency and advertiser feedback on the differentiated value we provide in content, reach, signals and ad technology,” said Jassy.

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Bank of America Securities analysts said Prime Video could generate $2 billion in additional advertising revenue in 2024.

Meanwhile, Macquarie analysts said that Netflix (NFLX) recently closed its advance, claiming a 150% advantage in ad spend committed to the second advance, but few other details.

Other sources cited a CPM of $29, below Netflix’s $39-$45 range last year, based on its current base of 40 million monthly users, the Macquarie report said.

CPMs, or cost per thousand, is a measurement and pricing model used in digital advertising that refers to the average cost a business pays for 1,000 ad impressions. The metric can help companies measure how effective their advertising efforts are.

Macquarie said Amazon put ads across all of its Prime content “in a swoop earlier this year,” flooding the connected TV market with ad deals and offering upfront CPMs of $20-$25.

“Prime has 115 million monthly ad-supported viewers in the US,” the analysts said. “While the oversupply of ads is weighing on pricing, we expect this will also lead to higher demand for biddable programmatic ad technology services from Trade Desk, Magnite and Pubmatic as publishers look to fill ad space at higher prices.”

JMP Securities raised its price target on Amazon to $265 from $245, while maintaining an outperform rating on the stock.

JMP says its higher-than-consensus advertising estimates are reasonable given Amazon’s vertically integrated advertising platform.

The investment firm estimates that Amazon will generate just under $2 billion in revenue from Prime Video in 2024, leaving it plenty of room to increase ad load and CPMs over time as viewing hours increase, in part thanks to the deals of license for live sports.

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