Evercore ISI managing director and head of internet research Mark Mahaney joins Seana Smith and Madison Mills on Catalysts to take a look at big tech stocks after the Federal Reserve kicked off its rate-cutting cycle with a focus on Amazon (AMZN) and its advertising opportunities. The Fed’s rate cuts create “a benign environment for a megacap tech stocks…If we replay the tape over the last two years, the beginning of 2022 was a terrible period for tech stocks, for long-duration assets, and because we went from zero to 100 or from 0% to 5% in terms of interest rates, [an] unprecedented spike in interest rates, and it really crushed the tech sector.” “We’ve had this pretty material outperformance in tech stocks, and now that the rates are starting to come down, that should help as well. I think a lot of this is anticipated into the stocks, but still a declining rate environment is generally good for long-duration assets like tech.” The analyst lifted his price target for Amazon, highlighting the “so-what” factor for Amazon going forward is its Amazon Prime advertising opportunity. “Amazon is so big as a company. It’s kind of hard to hit a lot of home runs from here. It’s all singles, really, but this is a good single.” “The company does about $50 billion a year in ad revenue. It’s actually the third largest ad platform in the world and there’s a lot of still unmonetized or lightly monetized areas [like] Amazon Prime Video… it’s a great opportunity for Amazon to scale up another revenue stream." “The ‘so what’ of this is it’s going to allow Amazon’s ad revenue growth rate, which has been around 20%, to accelerate going into next year, and then this is very high margin business…anything to boost the growth rates for either cloud or advertising is good for the business overall.” He says, “I call it the best mix shift story in tech, i.e., the fastest growing assets have the highest margins. It’s good for Amazon’s margins too.” The analyst discusses the “big bet that the company has made on live sports” with Thursday Night Football…“There’s just a lot more live sports content that’s on Amazon and I think that’s going to be one of the biggest investment areas for the company over the next three to five years, and you can monetize that.”
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