Wall Street has high expectations for Amazon’s (NASDAQ:AMZN) advertising business, with consensus estimates projecting over $98 billion in ad revenue by 2028.
While that figure is impressive, JMP’s Nicholas Jones, a 5-star ranked in the top 2% of Street stock experts, believes it’s still too conservative. Jones projects that by then, the ecommerce giant will be raking in more than $116 billion, arguing that the Street is downplaying its ability to capture a larger market share.
“We believe our higher-than-consensus advertising estimates are reasonable given Amazon’s vertically integrated full-stack advertising platform, which can serve upper funnel down to lower funnel advertising solutions,” Jones said. “Additionally, its Prime membership and visibility into its members gives it data and attribution capabilities that are likely unmatched by competitors.”
Starting in January, Amazon began displaying ads on Prime Video, while giving subscribers the option to choose an ad-free experience for an additional monthly fee. Based on what Jones considers “conservative assumptions,” he projects that advertising on Prime Video will generate roughly $1.95 billion in incremental revenue this year, increasing to a little over $10 billion by 2028.
With CTV ad loads currently being lower and more affordable than its competitors, Jones thinks there will be plenty of room to increase ad load and CPMs over time, especially as – partly driven by licensing agreements for live sports – viewing hours grow. Moreover, Jones expects Amazon to eventually leverage its ad-tech stack and “industry-leading data” and attribution capabilities more extensively across the open web, thereby creating “incremental revenue opportunities” for its advertising business.
As Amazon continues to rule over the retail media space, attract search budgets, and eventually extends its technology to the open web, the company “likely remains in its early days of attracting advertising budgets.”
With renewed confidence in Amazon’s ability to grow its ad business compared to peers, Jones has raised his price target from $245 to a Street-high $265, implying a 52% upside in the year ahead. It hardly needs adding, but Jones’ rating stays an Outperform (i.e., Buy). (To watch Jones’ track record, click here)
Jones is not alone in his optimism. Out of 42 analysts covering Amazon, only one holds a Hold rating, while the rest maintain Buy ratings, resulting in a Strong Buy consensus. At $222.69, the average price target suggests shares will surge 28% over the coming months. (See Amazon stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
