One of the leaders in the streaming media market—particularly as it relates to hardware—is Roku (NASDAQ:ROKU). So, when news first emerged that there was likely to be a renaissance coming up with the connected TV advertising market, that should have been good news for Roku. However, the news wasn’t as good as expected for Roku specifically, and now it’s down fractionally in Friday afternoon’s trading.
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Word from Morgan Stanley revealed that the market may be on the rise, but so too are the number of competitors looking to claim their own slice of that expanding pie. Morgan Stanley kept Roku at Underweight, and cut the price target from $65 per share to just $60, noting that there may be higher revenues for streaming services distribution, but there are also lower advertising growth expectations in the short term. And, with Walmart (NYSE:WMT) still likely getting into the fray with an acquisition of Vizio (NYSE:VZIO), that’s only going to complicate matters for Roku.
Fighting Back
While the exact impact of a Walmart/Vizio deal is uncertain, what’s much clearer is that Roku won’t be going down without a fight. A new patent suggests that Roku has an exciting new idea to push advertising, specifically when you’re not actually doing anything. The patent is called “HDMI customized ad insertion” and will let Roku offer up ads when you’ve stopped doing something.
Anything, really. Playing a video game and putting it on pause to fetch a snack? An ad comes up. Watching a movie and need a bathroom break? An ad comes up. There’s genius in this and some disturbing ramifications. But only time will tell if it goes live and what it might do to Roku sales and subscription rates.
What Is the Prediction for Roku Stock?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on ROKU stock based on eight Buys, 10 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 6.54% loss in its share price over the past year, the average ROKU price target of $86.69 per share implies 44.58% upside potential.
