Evercore's New Outlook for Amazon: Prime Video's Growth Potential
Evercore ISI Increases Amazon's Stock Price Target
Evercore ISI has announced an increased price target for Amazon.com (NASDAQ: AMZN), adjusting it from $225 to $240 while maintaining an Outperform rating. This optimistic revision is based on a calculated multiple of 35 times the firm's projected earnings per share (EPS) for 2026, estimated at around $7.00. Additionally, the firm anticipates a 25 times multiple on projected free cash flow (FCF), which they estimate to reach approximately $100 billion.
Prime Video's Strategic Enhancements
The analysts at Evercore identified Amazon's commitment to enhancing its Prime Video offerings as a key priority. With an impressive lineup that includes more NFL games, a WildCard Playoff game, and a substantial 66 NBA games in the 2025 season, the company's focus is evident. Furthermore, the 2024 PPA World Championships are also part of this content expansion.
Monetization Through Advertising
A significant part of Amazon's strategy revolves around monetizing these offerings through advertising. During a recent earnings call, CEO Andy Jassy emphasized that this segment of their business, which has recently achieved a revenue run rate of $50 billion, was crucial to their success, right after discussing Amazon Web Services (AWS).
Exploring New Revenue Opportunities
Additionally, Jassy highlighted Amazon's inaugural involvement in the Upfronts, illustrating that the company is only beginning to explore the potential within video advertising. The analysis conducted by Evercore has provided updated estimates for the monetization of Amazon Prime Video (APV), detailing a new interactive model aiming to uncover revenue and profit scenarios generated from both advertising and subscription models.
Projected Revenue Growth from APV
The projections indicate that APV could generate between $3.0 billion and $5.9 billion in total revenue by 2025. This revenue influx could contribute an incremental 3% to 9% on the estimated $56 billion in Amazon's advertising revenue for 2024. As a result, it's conceivable that Amazon's advertising revenue growth may accelerate to 20% in 2025, following a promising 19% growth forecast for 2024.
Financial Impact and Future Prospects
In terms of operating income, Evercore ISI estimates that APV could add between $1.8 billion and $3.3 billion in 2025. This contribution could represent an additional 3% to 5% to Amazon’s projected total operating income of $61 billion for the same year. The analysts believe that the ramp-up in monetization from APV will be instrumental in driving continued growth in operating margins well into 2025 and the years to follow.
Frequently Asked Questions
What is the new price target for Amazon stock set by Evercore?
Evercore raised the price target for Amazon from $225 to $240.
Why is Amazon focusing on its Prime Video service?
Amazon aims to enhance its competitive edge and expand monetization opportunities through advertising and content offerings.
How much revenue is projected for Amazon's Prime Video by 2025?
APV is projected to generate between $3.0 billion and $5.9 billion in total revenue by 2025.
What role does advertising play in Amazon's growth strategy?
Advertising is a crucial segment for Amazon, contributing to a significant revenue run rate and future growth in their media offerings.
What impact does Prime Video monetization have on Amazon's overall financials?
Prime Video monetization is expected to increase operating income and support sustained growth in operating margins for Amazon.
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