Analysts expect Amazon (AMZN) to have a record year for digital ad sales as advertisers slowly move away from social media platforms.
According to investment bank Cowen and Company’s 2022 Digital Ad Survey, analysts expect Amazon to beat out other companies such as Snapchat (SNAP), Twitter (TWTR) and Google (GOOG) despite each company benefitting from last year’s record-high digital ad sales.
One reason analysts are bullish on Amazon’s digital ad revenue is that 44% of respondents said they plan to increase their ad spending this year, “reflecting broad interest among advertisers to grow their AMZN budgets in (their) view.”
Amazon’s stock was down during Thursday’s trading session, losing 2.4% to $3,224.38 per share by the closing bell.
Cowen rates Amazon to “outperform” its competition and set its price target at $4,500 for the stock.
Digital ad spending estimates
Three of the US top digital ad agencies – Magna, Zenith and GroupM – released their final forecasts for the space in mid-December 2021 which said the US ad market is expected to climb north of $300bn (£218.83bn) by year’s end while the global market grows to more than $700bn.
All of the forecasts agreed that “pure play” digital media such as Netflix and Amazon will see the biggest leap in digital ad revenue.
However, Cowen analyst John Blackledge found that other pure play companies like Meta Platforms’ Facebook, Twitter, and Snapchat may not see the same benefit from the additional ad spending.
Blackledge said that Snapchat will have one of the toughest slogs to conquer if it wants to increase its ad revenue in 2022.
One of the major near-term concerns for the company is the iOS 14.5 changes made by Apple that have affected Snapchat’s measurement, targetting and attribution for direct response ad units, according to Blackledge.
According to Cowen’s survey, 63% of respondents expect similar impacts to their targeting and measuring capabilities for at least six months.
Cowen lowered its rating and outlook for Snapchat as well, rating it to “underperform” its peers with a price target of just $45 per share, down from the bank’s initial $75 target.
Social media spending decrease
While Blackledge expects Amazon to tower over the digital ad space in 2022, he also expects social media companies like Facebook and Twitter to lose their market dominance.
For example, Facebook is expected to see a modest 3% decline in ad share even though Blackledge anticipates Facebook’s subsidiary, Instagram, to bring in more ad revenue.
Cowen rates Facebook to “outperform” its peers with a price target of $415 per share.
Similarly, Blackledge expects Twitter to be negatively affected by the iOS 14.5 changes as well. Blackledge added that these changes will stagnate Twitter’s ad revenue at 4% of market share.
“Despite (Twitter) citing just 'modest impact' from App Tracking Transparency on their 3Q call, our ad buyers expect privacy concerns will lower their spend on the platform by 14% in the coming year on a spend weighted basis,” Blackledge said.
Cowen currently rates Twitter to “market perform” with a price target of $50, down from its initial target of $67.
Twitter’s stock was down more than 3.8% on Thursday to $38.70 per share.
Facebook’s stock was down more than 2% to $326.48 per share by the closing bell.
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