Roku (ROKU) stock has been on a tear recently, rising nearly 16% over the past 6 trading sessions. The majority of the upside resulting from resolution to the show down between what can possibly be described as a battle between the king and the challenger to its throne.
After threatening to remove all its other apps from the OTT leader’s platform, Comcast and Roku finally reached an agreement to bring Comcast’s streaming service Peacock to Roku.
Two months into its launch, Peacock was one of the few big-name VOD streamers not available on Roku. So, after locking horns in the drawn-out negotiations who came out as the winner? As Roku’s performance can attest, the market thought Roku gained the upper hand. So does Needham analyst Laura Martin.
“To us,” the 5-star analyst said, “This battle underscores Roku’s growing power vs Comcast, the largest legacy US linear-TV platform. Roku is where the puck is going, and Peacock had to be viewable by Roku’s 45% of US ConnectedTV homes, especially given Peacock’s anemic adoption to date.”
Among a number of “economic value drivers” the deal can provide, Martin believes there’s a simple reason why Roku stands to gain.
“Since any viewer that wants to watch any SVOD (subscription video on demand) or AVOD (ad-based video on demand) video app on Roku’s platform must start at its home screen, any new Peacock viewers add revenue upside to Roku’s home page ad inventory,” Martin opined.
Furthermore, Roku’s platform boasts 3,000 AVOD apps all competing against each other and to raise awareness and adoption of their service, these app owners typically purchase ads on Roku’s home page. “This has been especially true for Comcast’s big media competitors,” Martin said, “Which implies Comcast will also pay Roku promotion dollars.”
Add into the mix the data available to Roku from every app on its platform, which means that Roku can compare Peacock’s worth vs other AVOD apps, and “Roku’s negotiating leverage grows over time.”
To this end, Martin reiterated a Buy rating on Roku shares, along with a $190 price target. Following Roku’s upward movement, the figure suggests upside of a modest 2%. (To watch Martin’s track record, click here)
Overall, based on 13 Buy ratings, 5 Holds and 2 Sells, ROKU’s analyst consensus rating is a Moderate Buy. However, the average price target, which comes in at $168.42, implies shares could decline by nearly 10% from current levels. (See Roku stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
