Roku Hits Record With Channel Added to Amazon, Raised Targets

(Bloomberg) -- Roku shares advanced on Thursday after the company announced that its Roku Channel will be available on Amazon Fire TV, news that Citigroup called “an extraordinary development.”

This shows that the streaming-video platform company “is committed to expanding the reach of the Roku Channel far beyond Roku’s operating system,” wrote Citi analyst Jason Bazinet. He added that a broader distribution for the channel also means Roku revenue “will no longer be ‘tethered’ to Roku’s active accounts,” but to Fire TV’s “significant” reach as well.

The firm reiterated its buy rating and $220 price target on the stock, and wrote that revenue estimates would likely rise on the news. At the same time, it warned this could augment the bearish argument that a large portion of Roku’s revenue stems from its channel as opposed to “a slice of ad inventory from channels owned by other entities.” This development suggests the Roku Channel “will likely comprise a larger portion of Roku’s aggregate revenue as Fire TV’s penetration rises over time,” Citi wrote.

Shares rose 5.3% Thursday in their fourth straight advance and closed at a record. The stock is up 250% off a March low, and has gained about 40% since it reached a deal to carry Comcast’s Peacock streaming service.

The stock also got a boost after Needham raised its price target to the highest on Wall Street, citing accelerated growth in Roku’s installed base.

Deutsche Bank also raised its Roku target, to $235 from $185, and reiterated its buy rating. Deutsche Bank is more positive on Roku “as consumers continue to stream more content due to the pandemic and advertisers appear to be spending again.”

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