HBO Max, launched in May, was initially not available on Roku (ticker: ROKU) and
s (AMZN) Fire TV platforms. Connected television, or CTV, platforms like Roku allow users to access streaming services in their living rooms. They also seek a cut of advertising or subscriptions on their platform.
Benchmark analyst Daniel Kurnos wrote in a note Thursday that a deal was expected to happen eventually, but he still sees huge upside for Roku stock. He raised his price target to $410 from $300. He now has the highest such target listed by FactSet.
“The two recent deals are more meaningful than just the inventory they provide, as part of the prior bear thesis was centered on Roku losing negotiating leverage over time,” Kurnos wrote.
Kurnos notes that a lot of good news seems to be priced into the stock, but he still anticipates significant upside to consensus expectations for the company’s fourth quarter. He points to advertising strength driven by cost-per-mile, or CPM improvements. CPM is a marketing term used to denote the price of 1,000 advertisement impressions on one webpage.
He expects platform revenue to hit $431.7 million in the fourth quarter—a figure $20 million higher than his prior forecast. He thinks that could still prove conservative.
“We are now also ahead of consensus for 2021 on all metrics, effectively reflecting the flow-through impact and a slightly more optimistic baseline for underlying pricing even as the market trends a bit back toward more normalized levels,” he wrote.
Citi Research analyst Jason Bazinet, who has a $375 price target on the stock, wrote in a note Thursday that, ultimately, the economics of the deal are less important for Roku than getting one done.
“There will be plenty of time for Roku to revise future agreements with content owners that fairly values Roku’s large CTV platform,” Bazinet wrote. “Right now, building a truly global platform—with a wide array of content—is far more important, in our view.”
Roku stock was up 1.1% to $329.48 on Thursday. The
S&P 500 index
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