Twitch's Dominant Market Position Could Turn Into High-Margin Growth Driver For Amazon, Says Analyst

Needham analyst Laura Martin reiterates Amazon.com Inc AMZN with a Buy and a $120 price target.
Martin calculates that Twitch is worth approximately $45 billion, or 4% of AMZN's market cap.
Of this total, about $19 billion is Twitch's "direct" value (i.e., if it traded separately) plus $25.6 billion in its "indirect" value (i.e., the value Twitch creates for other AMZN businesses).
Twitch's revenue in 2022 was over ten times higher than in 2014 when AMZN purchased it.
Like Cloud and Advertising, Twitch is another data point that underscores AMZN's strong competence in building in-house market-leading businesses.
Since 2014, Twitch has dominated video game viewing. Twitch dominates video game live-streaming, representing approximately 75% of the total viewing time for the industry in 2022 (NewZoo).
Historically AMZN has turned market-leading businesses like Cloud and Advertising into high-margin growth drivers for shareholders, which the analyst expects to happen at Twitch as well, given its dominant market position.
Twitch is the most powerful marketing platform for new video game launches because consumers (i.e., potential purchasers) can watch their favorite influencer play the game first, making its TAM the largest.
Twitch's strong market position in the U.S. gives it deep moats, strong pricing power to access Twitch's users, and best-in-class data about this hard-to-reach audience segment.
Twitch's audiences are primarily additive to AMZN's ecosystem, which drives upside value faster. Twitch is arguably the least expensive way for AMZN to attract new users into its ecosystem.
Price Action: AMZN shares traded lower by 1.65% at $98.27 on the last check Wednesday.

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