Amazon will be able to compete against Google and Facebook in the internet ad business, according to one Wall Street firm.

Citi Research reiterated its buy rating for Amazon shares, predicting strong growth for its internet advertising business.

"Amazon is one of the highest quality companies in the Internet sector considering its consistent innovation and execution, the size of the opportunities it is pursuing, and its positioning within those future growth opportunities," analyst Mark May wrote in a note to clients Monday. "Amazon is currently our top pick in part due to the ad opportunity still being under-appreciated."

May increased his price target for Amazon shares to $1,600 from $1,400, representing 14 percent upside to Friday's close.

The analyst noted while Google and Facebook combined have nearly 70 percent share of the U.S. digital ad market, he is optimistic Amazon will be able to leverage its e-commerce retail operations to grow its ad business.

"Amazon has some obvious potential advantages over Google and Facebook. For instance, unlike any other platform — even Google and Facebook — Amazon combines global audience scale and engagement with actual conversion and transactional data," he wrote. "Any new meaningful competitor could take share from an already concentrated market — especially as advertisers and agencies are increasingly interested in diversifying their spend beyond the two goliaths."

May predicts Amazon's ad business sales will grow to $50.6 billion by 2028 from $10.2 billion this year.

Amazon shares are up 68 percent in the previous 12 months through Friday versus the S&P 500's 25 percent gain.

The company's shares are up 0.4 percent in Monday's premarket session after the report. Amazon will report its fourth-quarter earnings results on Thursday.

