US stock futures dip as Nvidia earnings spark little cheer
On Tuesday, Bernstein SocGen Group maintained its positive outlook on Amazon.com (NASDAQ:AMZN), reiterating an Outperform rating and a $210.00 price target for the company's stock. The firm's assessment comes after observing Amazon's ad revenues, which have not met expectations in the first half of the year.
This shortfall has led to questions about the viability of Prime Video Ads, which Amazon had previously announced with optimistic revenue and profit projections.
Amazon's decision to introduce advertisements to Prime Video was anticipated, following similar strategies on Twitch, Freevee, and live sports broadcasts. The company's approach to make ads a default feature, with the option for users to pay an additional $2.99 per month for an ad-free experience, was designed to instantly expose advertisers to a potential audience of over 200 million viewers.
Despite being favored as a top pick throughout most of 2024, Amazon faced a setback when ad revenues did not meet expectations in the second quarter of 2024, resulting in a sequential compression of North American retail margins.
However, the contribution of Prime Video ads to overall ad revenues is expected to be more significant in the second half of the year, especially in the fourth quarter.
This projection is based on the commitments made during the Upfronts, which concluded in the third week of August, and the anticipated deployment of more NFL ads and increased subscription revenues.
Bernstein forecasts that Amazon could see an incremental EBIT uplift of approximately $1-1.5 billion in the second half of 2024. This increase, which represents a 3-5% upside, is expected to come from a combination of ad-supported video on demand (AVOD) and the recent price hike for subscription video on demand (SVOD) services.
In other recent news, Amazon.com has been a focus of various developments. The company has been urged to increase its renewable energy capacity by 2030, a call to action made by executives from several companies during the United Nations Climate Week. This comes alongside a lawsuit filed by California against Exxon Mobil (NYSE:XOM) for alleged contribution to global plastic waste pollution, a charge Exxon denies.
Simultaneously, Amazon faced legal challenges in Germany, where a court ruled in favor of Nokia (HE:NOKIA), finding Amazon guilty of using patented video technologies without a license. The implications of this ruling have not been disclosed yet.
In relation to artificial intelligence regulations, Amazon, along with other tech giants, is engaging with the European Union to influence the AI Act's enforcement. The act is the first extensive legal framework for artificial intelligence worldwide. Amazon, Google (NASDAQ:GOOGL), and Meta (NASDAQ:META), represented by CCIA Europe, have expressed concerns about overly restrictive regulations potentially hindering technological development.
Evercore ISI recently upgraded Amazon's stock price target from $225 to $240, maintaining an Outperform rating. The firm emphasized Amazon's potential growth in its Prime Video service and the strategic move to increase advertising as a revenue stream.
BMO Capital also maintained its Outperform rating on Amazon shares following the company's annual seller conference, Amazon Accelerate. The company showcased various initiatives designed to increase revenue and reduce shipping costs.
InvestingPro Insights
As Amazon.com (NASDAQ:AMZN) continues to navigate the challenges and opportunities within its advertising and Prime Video segments, current market data and expert analysis offer additional context for investors. According to InvestingPro data, Amazon boasts a substantial market capitalization of $2.03 trillion, underlining its position as a leading player in the market. The company's Price/Earnings (P/E) ratio stands at 45.36, which, when adjusted for the last twelve months as of Q2 2024, shows a slight decrease to 45.11. This could indicate that the stock is trading at a valuation that reflects its near-term earnings growth potential.
Moreover, Amazon's Price/Earnings to Growth (PEG) ratio for the same period is 0.2, suggesting that the stock may be undervalued relative to its earnings growth. This metric, combined with a Price/Book (P/B) ratio of 8.61, provides a multifaceted view of Amazon's valuation. Additionally, the company has experienced a solid 12.32% revenue growth over the last twelve months as of Q2 2024, further demonstrating its robust financial performance.
InvestingPro Tips highlight that Amazon is trading at a high earnings multiple and operates with a moderate level of debt, which is an important consideration for investors assessing the company's financial health. Furthermore, Amazon's strong return over the last year, with a 50.15% price total return, is indicative of its market performance and growth trajectory. For those seeking more insights, there are 15 additional InvestingPro Tips available, offering a deeper dive into Amazon's financial metrics and market position (https://www.investing.com/pro/AMZN).
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