$AMZN PT Raised to $240 at Evercore ISI

$Amazon (AMZN.US)$ Our View: We are reiterating our Outperform on AMZN and raising our PT from $225 to $240 (based on 35X our ’26 EPS of approx. $7.00 and 25X our ’26 FCF of approx. $100B). AMZN remains our #1 Large Cap Long. In this report, we focus on Amazon’s ramped up focus and opportunity with Prime Video. Amazon has ramped up its content on Prime Video (e.g. more NFL games including a WildCard Playoff game, 66 regular season NBA games in ’25, and, especially, the 2024 PPA World Championships!). And monetizing that content via advertising has become a higher priority. On the Q2 EPS call, the first business unit after AWS discussed by CEO Andy Jassy was Advertising. Jassy noted that Ad revenue was at a $50B revenue run rate, that Amazon had made its first appearance at the Upfronts, and that AMZN was “at the very beginning of what’s possible in our video advertising.” Channel checks suggest to us that Amazon has already begun escalating ad loads on Prime Video in H2. Accordingly, we have updated our APV (Amazon Prime Video) monetization analysis (see our initial analysis here). We have developed an interactive model that details and generates a series of incremental revenue and profit scenarios for Amazon from APV monetization (both advertising and subscription). All in, we estimate that APV will generate between $3.0B and $5.9B in total revenue in 2025, implying 3% to 9% incrementality to our ’24 AMZN Ad Revenue estimate of $56B. The so-what? APV monetization could drive an acceleration in AMZN Ad Revenue growth in 2025. For now, we are estimating 20% AMZN Ad Revenue growth in 2025, following 19% growth in 2024. Further, given the high incremental margins associated with both APV Advertising & Subscription revenue, we estimate that APV will generate between $1.8B and $3.3B in Operating Income in 2025, implying 3% to 5% incrementality to our ’24 AMZN total Operating Income estimate of $61B. The so-what? The APV monetization ramp should help power ongoing Operating Margin expansion into 2025 and beyond.