(Updated - January 16, 2018 9:04 AM EST)

(updated to expand analyst comment)

BMO Capital raised its price target on Amazon.com (NASDAQ: AMZN) to $1,600.00 (from $1,200.00) while maintaining a Outperform rating.

Analyst Daniel Salmon has greater confidence in the company's ad business and raises his PT as he adjusted his model to "stacked DCFs" for valuation purposes. The analyst further comments "We believe direct response advertising realistically presents the company with a $18.0B revenue TAM in the midterm. We believe Amazon could one day drive 22% of its GMV via direct response advertising and that its take on this GMV (i.e., advertising cost of sale, or ACoS) averages around 18%. Taking our $457B GMV estimate for the company in 2019 and multiplying it by 22% and 18% gets us to the $18.0B revenue TAM. Because both 1P vendors and 3P sellers can advertise on Amazon, we include both 1P and 3P GMV in our calculation, taking into account that a portion of 1P GMV is from Amazon devices/private-label brands and thus does not present an ad revenue opportunity."