Amazon bought Twitch for $970 million in 2014, and in addition to being the dominant force in video game steaming, Twitch adds further value to the Amazon ecosystem due its core young demographic.
“Although we are most excited about advertising as a revenue diversification tool and upside profit driver for AMZN, Twitch is the most undervalued asset inside AMZN’s empire because it extends AMZN’s reach into the next generation of purchasers,” said the 5-star analyst.
What’s more, recent developments at fellow mega cap Microsoft have just added an extra layer of value to Twitch/Amazon.
Microsoft recently announced it is closing down its video game streaming platform Mixer (and will now partner with Facebook Gaming). As Mixer poached Twitch’s leading streamer Ninja in 4Q19 for an exclusive 3-year deal reportedly worth between $20 to $30 million, the platform’s dissolution means Ninja is now free (according to reports) to return home to Twitch, thereby, making it more valuable.
“Ninja made $10mm on Twitch in 2018, plus Twitch made $10mm (Twitch rev-share is 50%), so big Mixer celebrities returning to Twitch drives upside value for Twitch. AMZN owns 100% of Twitch, and Twitch today is worth more than last week,” Martin explained.
The Needham analyst reckons that out of Amazon’s $500 billion’s worth of media assets, Twitch is worth “$15B on $2.5B of 2020E revenue.” For 2020, Twitch is expected to report year-over-year growth of 67%.
No change then to Martin’s buy rating on Amazon shares. Investors will be looking at a 19% gain, should Martin’s 3,200 price target be met in the year ahead. (To watch Martin’s track record, click here)
AMZN’s Strong Buy consensus rating is based on an impressive 39 Buy ratings, indicating confidence in the stock. Only two analysts rate AMZN a Hold, and one says Sell. However, the average price target of $2,755.11 indicates a modest 4% upside. (See Amazon stock-price forecast on TipRanks)
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