American e-commerce behemoth Amazon.com (AMZN) got a new Street-High price target from JMP Securities, which cited the company’s enhanced capability to attract advertising dollars compared to rivals. Five-star analyst Nicholas Jones lifted the price target on the stock to $265 from $245 and kept his Buy rating on AMZN. The new price target reflects an impressive 48.5% upside potential from current levels.
Pick the best stocks and maximize your portfolio:
- Discover top-rated stocks from highly ranked analysts with Analyst Top Stocks!
- Easily identify outperforming stocks and invest smarter with Top Smart Score Stocks
Jones Sets High Revenue Estimates for Amazon Ad Services
The analyst has set higher-than-consensus revenue estimates for Amazon’s Ad Services business. Let’s take a quick look at the factors that drove Jones’ optimistic views.
- Prime Video Ad Revenues – Jones noted that Amazon Prime Video started an ad-supported subscription service last January, which is expected to generate $1.95 billion in incremental revenue toward the segment in Fiscal 2024. This figure is estimated to surge to over $10 billion by 2028, reflecting analysts’ optimistic view. It is worth noting that Jones believes that the ad-supported Prime Video revenue will only represent <10% of total advertising revenue.
- Prime Video Ad Monetization – The analyst added that currently, Amazon is featuring lower ad loads and charging lower CPMs (cost per mile) from advertisers than rivals to attract more subscriptions and advertisements. As the model ages over time, Amazon will have the option to increase both ad loads and CPMs favorably, while still remaining competitive. He also added that Amazon will attract additional viewers and viewing hours as it is spending more to produce original content and aims to add more live sports to the platform.
- Ad Revenues Sans Prime Video – Jones noted that Amazon operates a vertically integrated advertising and e-commerce platform. The analyst stated that the company will eventually point its ad-tech stack and membership-driven data to the open web. This will open ample revenue opportunities within the Ad Services segment outside of Prime Video.
Overall, Jones is expecting sizable revenue opportunities from Amazon’s Prime Video subscription and other verticals. The analyst contends that the consensus is underestimating Amazon’s revenue-earning capabilities and its potential to grow its market share. Jones’ revised price target is based on an EBITDA multiple (enterprise value/earnings before interest, tax, depreciation, and amortization) of 18x EV/2025E, up from the earlier multiple of 17x.
Website Traffic Hints at Amazon’s Thriving Business
The bullish stance of Jones and several other analysts is supported by the solid traffic experienced by Amazon’s online channels. According to TipRanks’ Website Traffic tool, the total estimated visits to all of Amazon’s apps and websites worldwide increased 22.16% in the year-to-date period compared to last year.
Is AMZN a Buy Right Now?
Apart from Jones, 40 other analysts have a Buy rating on AMZN stock, while only one analyst has a Hold rating. Based on these recommendations, AMZN stock earns a Strong Buy consensus rating on TipRanks. The average Amazon.com price target of $222.69 implies 24.8% upside potential from current levels. Meanwhile, AMZN shares have gained 17.5% so far this year.
