The stock has nearly doubled in 2020 as COVID-19 has boosted overall streaming hours. The influx of new services like Disney+, Apple TV+ and Peacock to challenge Netflix has been a positive development for the Los Gatos, CA-based tech firm. Earlier this month, it reported 14.8 billion hours of streaming in the third quarter, up 54% from the same point in 2019.
One new streaming entrant lacking a deal with Roku is WarnerMedia’s HBO Max. The subscription service just announced distribution with Amazon Fire TV — a major gatekeeper — on Monday. Two days later, Warner Bros said Wonder Woman 1984 would be released on HBO Max as well as in theaters next month, intensifying speculation that Roku’s 46 million households would soon enter the fold. HBO Max launched in May and has not caught fire in its early months, though WarnerMedia says its 8.6 million account activations puts it on track to achieve internal targets.
Media blog The Desk reported Thursday that the two companies were on the verge of announcing a deal. That report was not confirmed, but it appeared to capture investors’ imagination. Trading volume of nearly 12 million Roku shares was well above average.
Malone, chairman of Liberty Media, singled out Roku for affirmation in an interview with CNBC’s David Faber. “The consumer’s not going to want to buy from a broad number of subscription services. They’re going to tend to want to go to one convenient supplier. It looks increasingly like that’s going to be, you know, Amazon … or it’s going to be Apple, or it’s going to be Roku.”
Because it isn’t sinking money into programming, Roku can keep its focus on distribution and advertising and is “in pretty good position to build a long-term profitable global business,” he added.
Jeffrey Wlodarczak, an analyst with Pivotal Research Group, cited Malone’s thumbs-up in a report to clients Thursday raising his rating on Roku from “sell” to “hold.” He also vaulted his price target on shares by the end of 2021 to $240 from $75.
Earlier, the analyst had expected a lot of competitors with deep pockets to overwhelm Roku. But the pandemic, he wrote, “appears to have accelerated Amazon and Roku’s lead (and pushed back competitive responses) with the potential for that lead to be sustainable especially as the platforms build global scale.”