Amazon.com Inc (NASDAQ:AMZN)’s insertion of video ads into Prime Video content will unlock substantial revenue at high incremental margins, bolstering the margin bull case, according to UBS analysts.
In an update to clients, they raised their target price on Amazon stock from $175 to $180 per share, while maintaining their ‘Buy’ rating, noting the move looks well timed given inflecting budget shifting to Connected TV (CTV) amidst cord cutting.
"We estimate that Prime Video ads in the US alone could add $6.2 billion in incremental revenue and $0.40 in earning per share (EPS) over time and add about 1.2% to North America retail margins," the analysts wrote.
They added that Amazon has the potential to eventually compete for ad dollars with other performance driven platforms such as Google and Meta.
Shares of Amazon.com rose 1.8% to $129.40 in late-day trading on Monday.
Contact Sean at sean@proactiveinvestors.com