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Tech stocks moving to the upside, just ever so slightly today. A little bit of a mixed performance here though you are seeing recovery in the likes of Microsoft following that call with Gil Luria. We had him on earlier, but remember tech hitting record highs following the Fed's rate cut. Our next guest though, seeing outperformance in two of the MAG 7 names, in particular, joining us now to discuss with Mark Mahaney. Evercore ISI Senior Managing Director and Head of Internet Research. Mark, thanks for joining us. We're gonna get to your individual company calls, but I do want to start on the broader sector. To what extent is the path forward for the Fed playing into your overall outlook when it comes to large cap tech names?

Okay. Well, thanks for having me on Madison. I, uh, I would think that it creates a kind of a benign environment for mega cap tech stocks. If we go back to the, over the last, if we replay the tape over the last two years, you know, the beginning of 2022 is a terrible, uh, period for, um, uh, for tech stocks, for long duration assets, uh, and because we went from zero to a hundred or from zero to 5% in terms of interest rates. Unprecedented spike in interest rates and it caused, it really crushed, uh, the tech sector. We had 30, 40, 50% sell offs ever since then ever since the, the rate path has stopped rising and then we just been waiting to see just when it would start, when we'd have rates, rates come down. 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, but still, a declining rate environment is generally good for long duration assets like tech.

So, Mark, you have some uh, you have encouraging, optimistic outlooks on a number of these names, but I want to zero in on a recent note that you just published, uh, on Amazon. You raised your price target on the stock. You raised it to 240. That was up from 225. And you're talking about in this report, the focus from Amazon ramping up their opportunity within Prime Video. Give me the so what factor. Why is this important? Why is this significant? Ultimately, how is this really going to drive some of that business going forward?

Okay. And so this is, uh, you know, Amazon advertising is just one part of the business. It's Amazon is so big as a company. Um, it's, it's kind of hard to have hit a lot of home runs from here. It's all singles really, but, but this is a good single, uh, and that is, you know, 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. Amazon Prime Video, they only started really directly monetizing Amazon Prime Video in January when people were kind of opted into an ad supported plan. You could pay $3 a month to get out of that. But uh, but you started seeing ads and they started bumping up the ad load as you've kind of gone through the year. Uh, and they're coming to market with, you know, reasonably or relatively below market price, uh, especially versus say, like a Netflix in terms of that ad inventory. So, it's a somewhat, but it isn't under, it's been an under-monetized asset and it's a great opportunity for Amazon to scale up another revenue stream. And what the, so what of this is, I think it's going to allow um, Amazon's ad revenue growth rate, which has been around 20%. I think it'll allow it to accelerate, uh, going into next year. And then this is very high margin business. You know, if you take a look at Amazon, you look at retail, 5% operating margins, cloud is 30%, advertising is 30% too. So anything to boost the growth rates for either cloud or advertising is good for the business overall. 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. That's the so what.

How much do the NFL games on Thursday nights play into that broader ad revenue call?

Oh, it's, uh, it's a big bet that the company has made on live sports. So they've leaned more and more into Thursday night football. And I think they're going to be carrying a, uh, wildcard playoff game, uh, this year, but there, there's more sports content, live sports. Uh, the NBA, we do call out that the PPA, the Professional Pickleball Association is having its world championships on Amazon Prime. But just in general, and on a more serious note, there's just a lot more live uh, sports content that's on, uh, Amazon. And um, I think you'll see, I think that's going to be one of the biggest investment areas for the company over the next 3 to 5 years. And you can monetize that. By the way, sports carries some of the highest CPMs uh, out there because it's a rare opportunity to put together that kind of intense audience. Uh, so um, size and frequency of that audience. So, yeah, I'd expect to see more of that from Amazon.