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Streaming device maker Roku saw its shares jump nearly 11 percent Thursday after strong quarterly earnings and an analyst’s upgrade that said the company has “won the streaming wars.”
It’s been quite a week for Roku, an independent hardware maker best known for inexpensive streaming sticks, dongles and pucks with a slick interface. Earlier this week, Roku announced it has 51.2 million active accounts, up 14 million from a year earlier, or nearly 38 percent.
In response, Needham analyst Laura Martin upped her price target from $315 to $400, writing to clients, “What’s clear to us from 2020 is that ROKU
“The world is moving to streaming and we look forward to continuing to help viewers, advertisers, content publishers, and TV manufacturers succeed in the Streaming Decade,” Roku CEO Anthony Wood said in a statement announcing the company’s latest quarterly results this week.
Roku closed the day at $379.29 per share, up 10.6 percent from Wednesday, and a record for its stock price. The company is up nearly two-thirds over the past quarter.
Though the company is known for its hardware, and the distribution platform that provides, it makes most of its money from higher-margin advertising revenue and its share of subscription fees that it collects for the SVOD services sold through its platforms.
Together, those have given the company admirable leverage to dictate terms to even some of Hollywood’s biggest studios.
Roku demonstrated its power this past year when it blocked both AT&T
That should mean even more revenue opportunities for Roku, which already had seen watch time up 55 percent in the pandemic, to 58.7 billion hours in 2020.
Roku also is deep in talks with failed mobile-video service Quibi to acquire its catalog, the Wall Street Journal reported over the weekend. Though Quibi was a spectacular bust-out, burning through most of the $1.75 billion it raised, it also commissioned dozens of shows, many from high-profile creators.
It’s possible those shows would do better on a platform with Roku’s scale, particularly on connected TVs where so many audiences have convened during the pandemic (Quibi was hobbled partly because its interface didn’t let users “throw” shows from their phones to bigger screens, nor to watch shows in longer form than its original 8- to 10-minute “quick bites.”)
If Roku goes ahead with the deal, it would mark a big step for the company, which has profited for years on content that it doesn’t own. That would also put it in more direct competition, in yet another sector, with some of the biggest companies in tech and entertainment.
As well, original content has proven to be an expensive and unreliable business, though one that’s seen by streaming services as a crucial differentiator to attract and keep audiences.
Regardless of the Quibi conversations, Roku faces plenty of competition. Alphabet, Amazon, and Apple all make streaming devices, and have invested heavily in their own ecosystems tied to phones, TVs, smart speakers, and much else. Vizio and Samsung also have their own proprietary distribution platforms on their TVs.
Amazon just last week said its Fire platform is now in 50 million households, joining Roku as one of the two dominant platforms in the United States.
Roku’s highly profitable Roku Channel – really a collection of free, ad-supported live, linear and on-demand shows, news and movies – competes with Amazon’s IMDB Channel, Comcast’s Xumo, Fox’s Tubi, and ViacomCBS’ Pluto (the latter three of which are also available on Roku).
Despite that competition, and all the high-profile subscription services that launched in the past 14 months, the Roku Channel has thrived. The company estimated it reached an estimated 61.8 million viewers in 2020.
Future growth may depend on Roku’s ability to move beyond the United States, which would put it on a different competitive footing against overseas powers such as Samsung, Chinese manufacturers, Amazon, and Alphabet’s Google TV/Android TV combination.
