Analysts with JMP Securities boosted their price target for Amazon stock, citing the tech giant's "robust advertising tech stack" and expected growth for the company's ad sales.
JMP analysts led by Nicholas Jones reiterated a market outperform rating for Amazon and boosted their price target to 265, from 245. The target represents 48% upside from Amazon's closing price on Aug. 30 and is the highest projection among analysts, according to FactSet. The target is driven in part by JMP's confidence that Amazon can attract increased advertising spending.
"We believe our higher-than-consensus estimates for Amazon's Advertising Services business are reasonable given its robust advertising tech stack, recent introduction of ad-supported Prime Video, ongoing investments in content, including live sports, and its industry leading e-commerce and fulfillment platform," Jones wrote in the client note published Monday.
Amazon Projected To See Ad Revenue Growth
Amazon's digital advertising business trails only Google parent company Alphabet and Facebook and Instagram owner Meta Platforms for total market share, by most estimates. The rise of the high-margin business has boosted the profitability of Amazon's sprawling retail operation. But Amazon reported slower-than-expected Q2 ad sales in the second quarter while missing overall revenue estimates, contributing to a sell-off for the stock.
But JMP analysts are bullish that Amazon will grow its advertising business faster than investors anticipate in the coming years. They project year-over-year ad growth rate for Amazon to remain in the "high teens to low twenties" between this year and 2028 (compared to 24% growth in 2023). Consensus estimates, meanwhile, call for moderating growth to the low teens over the same period.
"Given AMZN's vertically integrated advertising and e-commerce platform, we believe consensus is underestimating its share gain potential, which, in turn, should drive more leverage in AMZN's e-commerce cost structure," Jones wrote.
Amazon's "unmatched" Prime membership data gives it an advantage in the ad market, the note added. The company is also early in the process of ramping up ad sales for its Prime Video service.
"As Amazon dominates the retail media space, continues to attract search budgets, and, we believe, eventually points its technology to the open web, the company likely remains in its early days of attracting advertising budgets," Jones wrote.
Amazon Stock: Trading Below 50 Day Line
On the stock market today, Amazon stock is down more than 1% at 176.21 in morning trades.
Amazon is still digging out from the slide that followed a mixed second-quarter earnings report on Aug. 2. Concerns about the broader economy pushed Amazon shares even lower in the next trading session.
Shares bounced back from a low of 151.61 on Aug. 5 but have yet to retake Amazon's 50-day moving average.
Amazon stock hit an all-time high of 201.20 on July 8 but slumped shortly after, including the post-earnings sell-off. The stock has formed a consolidation base with a buy point of 201.20, according to MarketSurge pattern recognition.
