UBS raised Amazon's (NASDAQ:AMZN) price target to $180.00 from $175.00, maintaining a Buy rating. The bank believes that the introduction of video ads within Prime Video content will unlock substantial revenues and boost margins significantly.
Amazon plans to start including ads in Prime Video shows and movies from early 2024, initially in the U.S., U.K., Germany, and Canada, expanding to other countries later. All Prime subscribers will see ads unless they choose an ad-free tier for an extra $2.99 per month.
UBS estimates that Prime Video ads in the U.S. alone could generate $6.2 billion in incremental revenue and increase earnings per share by $0.40 over time, potentially adding around 1.2% to North America retail margins. This has led UBS to revise its estimated ad revenue for 2024 to $55.8B, up from the previous $52.7B estimate.