Amazon Prime Video's ad event beat targets. That's good news for the stock, says BofA.

By Ciara Linnane

Prime drew more than $1.8 billion in ad commitments at an upfront event, putting it on track for up to $4 billion in 2025 ad revenue

Amazon.com Inc.'s streaming video service drew more than $1.8 billion in advertising commitments from last week's upfront event, exceeding the company's own targets and putting it well ahead of rival Netflix Inc., Bank of America analysts wrote Monday.

Analysts led by Justin Post cited a report in the tech-focused business publication the Information that said Netflix (NFLX) has generated hundreds of millions of dollars from upfronts for next year. Upfronts are the annual meetings that gather network heads, media and advertisers to sell commercial airtime for the coming season.

The report has led BofA to expect that Amazon (AMZN) could be on track for $3.5 billion to $4 billion in ad revenues in 2025.

While that still gives the e-commerce and cloud juggernaut plenty of headroom versus Disney (DIS), NBCUniversal (CMCSA) and even YouTube (GOOGL), it suggests growing traction.

Disney is reported to have generated $9 billion in upfront commitments in 2022, the last year for which data are available, while NBCUniversal generated $7 billion. YouTube is reportedly expected to generate about $7 billion in upfronts for 2024, according to the Information, the BofA analysts said.

Given that Prime Video has only been serving ads for nine months, the bullish reports on performance versus expectations "could suggest advertisers are seeing favorable ROIs (returns on investment) on Prime Video," said the note.

The analysts had already published a bullish note on the value Amazon could offer advertisers in May, when it noted the large user base - an estimated 115 million U.S. viewers - a growing content slate, innovative ad formats and the benefit of rich data and measurement capabilities, thanks to the company's retail integration.

See also: Amazon raises pay for fulfillment and transportation workers by $1.50 an hour, adds Prime membership as benefit

Upfronts typically capture most of an advertiser's TV ad spending.

"In our view, streaming lends itself more to programmatic buying vs. traditional media, so 50-60% from upfronts could be a conservative assumption," the analysts said in the note. "If we assume Amazon generated more than $1.8bn in upfronts, and next year's upfronts are even bigger than this year, we [estimate] Amazon could be on track for $3.5bn-$4.0bn in 2025 Prime Video advertising revenue (5-6% of our '25 ad revenue est.)"

Amazon has invested an estimated $9 billion in 2024 into producing and licensing content for Prime Video. That includes ramping up live sports with a $1 billion-a-year deal to stream Thursday Night Football and a $1.9 billion-a-year deal for regular-season NBA games.

"While Amazon's 2024 ad sales may be ramping a little slower than we initially anticipated, a solid upfront vs. peers suggests Amazon appears well on its way to building an effective streaming ad platform," the analysts said.

The analysts have a buy rating on the stock with a $210 price target, which is about 13.5% above its current price.

The stock has gained 22% in the year to date, outperforming the S&P 500 SPX, which has gained 20%.

-Ciara Linnane

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09-30-24 1119ET

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