Advertising is one of Amazon’s (AMZN) fastest-growing segments. Ad spend generated over $6.9 billion in Q1, increasing by 77% year over year. However, according to data sourced by Mizuho Securities’ James Lee, the data shows that in 2Q21, despite June’s Prime Day event, daily spend per advertiser decelerated 5 points to 51% year-over-year growth.
Without Prime Day, the data would look even weaker. Spend per advertiser per day growth in April and May was “well below” the quarterly average but due to Prime Day, Q2 ad spend got a boost in June.
“We believe advertisers were deferring their ad spending from April and May into June as ad budgets are typically less during a low seasonal quarter,” Lee opined.
That said, this year’s June Prime Day had a “bigger lift” in advertising spend than last year’s December event. During the two days of promotions, ad spend per advertiser spiked by 3.7x vs. the 2.6x uptick in 2020.
There are other reassuring metrics. As with the prior quarter, all discretionary product categories have been on the rise, which Lee says reflects “the recovery in demand for discretionary products and improved capacity in logistics and fulfillment centers.” Ad spend in Electronics was also particularly strong in 2Q21, rising 44% year-over-year.
However, essential products’ growth pulled back “on tough comps.” Following a weak April, recovery in May and June saw Health & Household ad spending remain at 14% YoY, although for Pet Supplies, ad spend growth decelerated by over 30 points in the second quarter to -34%.
Overall, however, Lee remains buoyant on the forecast for the rest of the year.
“Although the quarter tracks in line,” Lee summed up, “We remain positive on Amazon’s advertising in 2H on back-to-school and long-term outlook due to the incremental opportunity of DSP (demand side platform), which could drive upside of 20% using Google as a proxy.”
All in all, Lee rates AMZN shares a Buy, along with a $4,400 price target. The implication for investors? Upside of 23%. (To watch Lee’s track record, click here)
It’s a full house of 32 Buys for Amazon from Wall Street’s analyst corps, naturally culminating in a Strong Buy consensus rating. At $4,299.35, the average price target suggests shares will be changing hands for ~20% premium a year from now. (See AMZN stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
