A unique company and stock that straddles both the tech and consumer goods sectors, Amazon (AMZN 3.43%) is a must-own for many investors. So it's hardly an undiscovered stock, but there are more than a few pundits out there who feel it still has plenty of upside potential.
One is Deutsche Bank's Lee Horowitz, one of the more bullish analysts covering the company. In early March he raised his price target on the stock. Let's climb to his lofty new level to determine whether Amazon is as much of a buy as he believes.
A new revenue stream for Amazon
Horowitz added $10 per share to his Amazon fair value assessment for a new level of $210. Given that the stock trades at about $172 apiece these days, he's anticipating that it'll rise at least 22%.
Any business that is large and well-established can have trouble growing significantly, but Horowitz said he is confident Amazon can keep cranking its numbers higher. This is "due to the increasingly compelling operating income growth that the company is slated to deliver in the coming years."
The prognosticator singled out what he described as "the incremental operating income contribution" from advertising sold on its Prime Video streaming service (which recently rolled out an ad-supported tier). In his view, Prime Video could bring in anywhere from $4 billion to $6 billion worth of ad revenue both this and next year.
Amazon is a business worth watching
In his new analysis, Horowitz highlighted a new aspect of Amazon's business that hasn't been discussed much. By extension, Prime Video advertising probably isn't on the radar of many investors. Even if it attains only half the potential the analyst thinks it holds, the business could still bring in billions of dollars to the company every year. This is one part of Amazon's operations to watch in the near future, and it boosts the buy case for the stock.
