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Gabby Jones / Bloomberg
Roku
stock surged Thursday after the company reached a deal to add
AT&T‘s
HBO Max on its platform. The news has made an analyst at Benchmark significantly more optimistic about the stocks.
Launched in May, HBO Max was initially unavailable on Roku (ticker: ROKU) and
Amazon.com ‘
s (AMZN) Fire TV platforms. Connected television, or CTV, platforms such as Roku allow users to access streaming services in their living room. They are also looking for some of the ads or subscriptions on their platform.
Benchmark analyst Daniel Kurnos wrote in a note on Thursday that a deal would eventually come, but he still sees a huge advantage for Roku stock. He increased his price target from $ 300 to $ 410. He now has the highest target listed by FactSet.
“The two recent deals make more sense than just the inventory they provide, as part of the earlier bear thesis focused on Roku losing its negotiating position over time,” Kurnos wrote.
Kurnos notes that a lot of good news appears to have been priced in the stock, but he still expects a significantly higher level than the company’s fourth-quarter consensus expectations. He points to the power of advertising driven by cost per mile or CPM improvements. CPM is a marketing term used to describe the price of 1,000 ad impressions on a single web page.
He expects fourth-quarter platform revenues to be $ 431.7 million – a figure that’s $ 20 million higher than his earlier forecast. He thinks that could still be conservative.
“We are also now ahead of the 2021 consensus for all metrics, effectively reflecting the flow impact and a slightly more optimistic underlying price baseline even as the market moves back a bit to more normalized levels,” he wrote.
Citi Research analyst Jason Bazinet, who has a $ 375 price target on the stock, wrote in a note on Thursday that the deal’s economy is ultimately less important to Roku than getting one off.
“There will be plenty of time for Roku to review future agreements with content owners who reasonably appreciate Roku’s large CTV platform,” Bazinet wrote. “At the moment, building a truly global platform – with a wide variety of content – is much more important to us.”
Roku stock rose 1.1% to $ 329.48 on Thursday. The
S&P 500 index
rose 0.6%.
Write to Connor Smith at [email protected]