On June 16, Needham’s team published an analysis of Amazon’s stock. They
estimate that the company’s media division represents $500 billion in hidden asset value, almost as much as the company’s cloud division, AWS, valued at $560 billion.
“Twitch is the most undervalued asset in the Amazon empire.”
According to Laura Martin, an analyst at Needham, 20% of Amazon Prime subscribers subscribe less for fast delivery than for the accompanying offers. Based on 2020 revenue, Prime subscriptions generated $187 billion, music $3.8 billion, Twitch $15 billion, and advertising $127 billion. The remaining $170 billion or so needed to reach $500 billion represents this so-called “hidden value.”
Higher margins than online commerce, data sources, brand presence in homes – Laura Martin is enthusiastic about Amazon’s media sector, and particularly about Twitch: ”
Twitch is the most undervalued asset in the Amazon empire (in our opinion) because it allows Amazon to extend its reach to the next generation of shoppers. Similarly, Amazon Music extends the reach of the Amazon demo into the home .”
In the long term, the share price could reach $5,000
The firm specifies that a subsidiary, if independent of Amazon, would be 1.5 times less valuable. The key is to integrate into Jeff Bezos’s company strategy, gain a foothold, and then expand. Laura Martin explains that ” Amazon’s data superiority, economies of scale, and brand franchises generate additional revenue for any company owned by Amazon compared to what that company could generate as a standalone entity .”
Based on these various observations, Needham estimated that the target price for an Amazon share was $3,200 (it is currently $2,640). Laura Martin believes that in the long term, the share could be worth up to $5,000 due to these hidden values. This year, Amazon’s share price has increased by 42%, bringing it to a record market capitalization of $1.3 trillion . If Needham’s analysis is to be believed, this growth is unlikely to stop.
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