being an investor Roku(NASDAQ:ROKU) It is perhaps best explained by the opening words of Charles Dickens’ novel. A tale of two cities“We’ve had the best of times, and we’ve had the worst of times.” Since the company’s IPO in late 2017, the stock has soared 1,940% in less than four years. But Roku plummeted as a post-pandemic streaming hangover and economic downturn hit ad budgets. The stock has not regained momentum and is still 82% off its all-time high.
But Roku stock has been on the rise in recent days, rising 28% in less than a week (as of this writing) as investors scramble to buy shares.
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This rally was driven by windfall, and if Wall Street is to be believed, there could be more to come.
Image source: Getty Images.
Roku has long been the dominant streaming platform around the world, currently commanding 48% market share, according to connected TV (CTV) analytics platform Pixalate. In fact, Roku served approximately 86 million streaming households in the third quarter, and those viewers logged 32 billion streaming hours. This equates to over 4 hours of viewing time per household per day.
In exchange for being included on Roku’s main platform, the streaming channel hands over 30% of its ad inventory to Roku, which accounts for the majority of the company’s revenue.
Late last month, trade desk(NASDAQ:TTD) Roku’s longtime advertising partner has launched Ventura, which it calls a “revolutionary streaming TV operating system.” The Trade Desk developed the system with a focus on advertising, saying it would “solve key problems in today’s typical market systems, including frustrating user experiences, inefficient advertising supply chains, and content conflicts of interest.” said.
The Trade Desk promises a more engaging user experience, more streamlined streaming TV ads, and fewer but more relevant ads.
But the platform would put The Trade Desk in direct competition with Roku in the streaming platform market, which could hurt ad revenue. So why is Roku stock on fire? Comments from several Wall Street analysts ignited the flames.
Guggenheim analyst Michael Morris said in a letter to clients on Monday that The Trade Desk’s Ventura System could compete with Roku, especially given the long partnership between the two companies. He then hypothesized that both companies would benefit if The Trade Desk acquired Roku. He also noted that Roku’s market penetration is large enough that “Ventura will need a long rise to achieve the market penetration necessary to impact the industry.”
he wrote: ”[We] believe [The Trade Desk] Ability to scale rapidly [operating system] While achieving Roku’s ambitions through its 85+ million global streaming households, Roku has the potential to quickly leverage its audience data and expand its CTV inventory to meet growing advertiser demand. there is. ”
It’s important to note that the analyst said this exercise was “purely hypothetical.” He has no insight into what plans the two companies may have.
Indeed, Melinda Zurich, vice president of communications at The Trade Desk, called this “pure speculation” in an emailed statement to The Motley Fool, saying, “Our commitment to never owning the content is “This is in direct contradiction to our position.” This would preclude any takeover offer.
But speculation quickly reignited, fueled by Needham analyst Laura Martin. Analysts quoted: walmart$2.3 billion acquisition of Vizio by. By integrating online and offline shopper data, Walmart will have more robust consumer data to inform targeted advertising. This helped highlight the value of Roku’s viewers and audience data, leading analysts to predict that Roku would be acquired in 2025 at a “huge premium.”
Martin named multiple candidates, including streaming giants. Netflixtrade desk, retailer targetand major tech companies. Amazon, microsoftand alphabetall of which can benefit from Roku’s treasure trove of audience data. The analyst added, “We believe one of Roku’s most undervalued assets is its data, which it has never monetized separately.”
From all the chatter, it’s clear that Roku is an attractive acquisition candidate. But while the rumors are appealing, there’s no reason to buy the stock.
That said, Roku is the world’s leading streaming platform and maintains a cache of valuable viewer data on its 85 million viewers. In Q3, the number of streaming households increased by 13% and streaming hours increased by 20% as the company extended its lead, indicating strong user engagement. This led to a 16% increase in revenue and Roku’s fifth consecutive quarter of positive earnings before interest, taxes, depreciation, and amortization (EBITDA) and free cash flow. This has helped the company cut its losses by 97% and is returning to profitability after a long drought due to inflation.
Let’s be clear: Roku shareholders have been on a roller coaster ride over the past few years. But despite the volatility, the stock has delivered great returns for long-term investors, gaining 261% over the past seven years (as of this writing), far outpacing the 142% share price increase. S&P500.
Finally, Roku offers an attractive price for an attractive opportunity with only 3x more sales.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Danny Vena He has positions at Alphabet, Amazon, Microsoft, Netflix, Roku, and The Trade Desk. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, Netflix, Roku, Target, The Trade Desk, and Walmart. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has Disclosure policy.
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