Title: Roku Stock Soars as The Trade Desk Announces Major Partnership
Being an investor in Roku (ROKU -4.59%) can feel like living in Dickens' world of "It was the best of times, it was the worst of times." Since its IPO in 2017, the stock soared up to 1,940% in less than four years. However, post-pandemic downturn and advertising budget cuts led to a plunge, leaving the stock 82% away from its peak. Lately, Roku's stock has seen a 28% surge in a week, fueled by speculations and potential acquisitions.
The spark for this rally came from The Trade Desk's (TTD -2.24%) advent of a new streaming TV operating system, Ventura, late last month. Ventura, claimed to be a solution for frustrating user experiences, inefficient ad supply chains, and content conflicts, could put Roku directly in competition. So why is Roku stock surging?
Analysts like Michael Morris at Guggenheim hypothesized that if The Trade Desk acquires Roku, both parties could benefit from the deal. His argument is that Roku's massive impact and The Trade Desk's ambitions could speed up rapid scaling. However, in an emailed statement, Melinda Zurich, VP of Communications at The Trade Desk, dismissed the acquisition speculations, citing conflicts of interest with content ownership.
Speculations were further fueled by Needham analyst Laura Martin's predictions. She cited Walmart's $2.3 billion acquisition of Vizio as an indication of the value in Roku's audience data, hinting that Roku could be acquired for a "big premium" in 2025. Potential suitors might include streaming giants like Netflix, tech giants like Amazon, Microsoft, and Alphabet, or retailers like Target.
While these conversations may be stimulating, they don't necessarily provide a buy-indicator. Investors seeking clarity should consider Roku's current strengths. As the leading streaming platform, it boasts a vast audience of 85 million users, a 13% increase in streaming households in Q3, and a 20% growth in streaming hours. Roku's revenue rose 16%, and it recorded a fifth consecutive quarter of EBITDA and free cash flow growth, showing signs of returning to profitability.
Roku has been a long-term winner for investors, growing 261% over the past seven years, surpassing the S&P 500's 142% growth. The stock, currently trading at 3 times sales, continues to offer an attractive price for investors seeking intriguing opportunities. Regardless of the merger and acquisition rumors, Roku’s dominant position in the CTV market makes it a promising investment option with a possible lucrative future.
The recent surge in Roku's stock might be attributed to the potential benefits if The Trade Desk were to acquire Roku, as suggested by analyst Michael Morris. Moreover, the speculation of Roku's valuable audience data leading to a possible acquisition by a tech giant or retailer in 2025 is also influencing the finance world, considering Roku's attractive price and promising future in the CTV market.
