Analyst revises Amazon stock price target on advertising estimates

Will Rogers once said that advertising is the art of convincing people to spend money they do now not have for something they refuse.

Fans of "The Boys" may disagree. They will possibly be just loving the Amazon (AMZN) Prime series just a couple of gang of corrupt superheroes, which change into the No. 1 streaming show for the week ending Aug. four

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The show's fourth season is now Prime Video’s fourth most-viewed TV season of all time, Variety reported, coming in on the back of “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 is resonating with our hundreds of millions of monthly viewers worldwide," Andrew Jassy, Amazon’s president and CEO, told analysts at some point of the company’s second-quarter earnings call on Aug. 1.

"When combined with our original films and shows, partnered streaming products and services, licensed content, and rent or buy titles, Prime Video continues to conform into definitely the right destination for streaming video," Jassy said.

Amazon CEO sees 'exciting opportunity' in Prime

A survey of 1,A hundred Amazon Prime members by Evercore ISI found that Sixty one% of respondents picking from more than one options chose Prime Video as one of many principle reasons they subscribe, while 73% chose the shipping benefit, IndiWire reported in June.

Within the prior three years of the survey, free shipping hovered above eighty%, while Prime Video sat at around forty 5%.

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That kind of recognition translates into numerous eyeballs, together with potential customers for advertisers.

“With ads and Prime Video, the exciting opportunity for brands is the flexibleness to in an instant connect advertising that has traditionally been keen on driving awareness, as is the case for TV, to a business outcome like product sales or subscription sign-ups," Jassy said.

"We're in a position to do that through our measurement and ad tech, so brands can continually enhance the relevance and performance of their ads."

While ads change into a norm on streaming video, Jassy said, Amazon aims "to have meaningfully fewer ads than linear TV and other streaming-TV providers."

Amazon, which rolled out classified ads in Prime Video content for U.S. customers on Jan. 29, offers ad-free viewing for $2.ninety nine a month.

Brian Olsavsky, chief financial officer, said "advertising remains an awfully important contributor to profitability for the duration of the North The USA of the us and international segments."

"And we saw strong growth on an progressively more larger revenue base this quarter," he said. "We continue to peer opportunities to in the same way extend our offering in areas which could possibly be driving growth as of late like sponsored products, as well as more recent areas like Prime Video ads."

Jassy noted that "sponsored ads drive the bulk of our advertising revenue as of late, and we see in the same way opportunity there."

Analysts see potential in advertising

In May, Amazon made its first appearance on the upfronts, a gathering held by television network executives and attended by major advertisers and the media, where marketers can buy commercial airtime a number of months prior to the TV season begins.

"We're encouraged by the agency and advertiser feedback on the differentiated value we offer across our content, reach, signals and ad tech," Jassy said.

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Bank of The USA of the us Securities analysts said Prime Video may generate an incremental $2 billion in advertising revenue in 2024.

Meanwhile, Macquarie analysts said Netflix (NFLX) recently closed its upfront, claiming a hundred and fifty% upside in committed ad spending in its second upfront but few other details.

Other sources mentioned a $29 CPM, lower than Netflix's $39-$forty 5 range last year, on its current base of forty million monthly users, the Macquarie report says.

CPMs, or cost per thousand, is a metric and cost model utilized in digital advertising that refers to the common cost a corporation pays for 1,000 advertisement impressions. The metric can help companies measure how efficient their advertising efforts are.

Macquarie said that Amazon put ads across all its Prime content "in one fell swoop earlier this year," flooding the connected-TV market with ad supply and offering CPMs in its first upfront as little as $20-$25.

"Prime has 115 million ads-supported monthly viewers for the duration of the US," the analysts said. "While the oversupply of ads weighs on pricing, we are awaiting it to result in more demand and for biddable programmatic ad tech products and services from the likes of Trade Desk, Magnite and Pubmatic, as publishers seeking to fill ad slots at higher prices."

JMP Securities boosted its price target on Amazon to $265 from $245 while keeping an outperform rating on the shares.

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

The investment firm estimates Amazon will generate just lower than $2 billion in revenue from Prime Video in 2024, leaving it ample room to increase ad load and CPMs over time as viewing hours increase, due in part to licensing agreements for live sports.

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