Amazon (AMZN) and Roku (ROKU) have reached a multiyear extension of their video distribution agreement. Amazon stock rose almost 3% on April 4 to close at $3,366.93.
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The distribution agreement renewal means Amazon’s Prime Video service will continue to be available on Roku devices. Roku is the most-used video streaming device brand in the U.S. with more than 111 million users. Its market share was estimated at 51.7% in 2021 and is forecast to surpass 53% in 2022, according to eMarketer data. Thus, many video streaming services seek to be present on the Roku platform to extend their reach.
For Amazon, the Prime Video service is among the many perks it offers its Prime members – an important segment of its retail customers. Prime members pay an annual subscription fee of $139. They can also opt for a monthly plan that costs about $15. Amazon has more than 200 million Prime members globally.
What Is the Takeaway for Amazon Investors from the Roku Deal?
In addition to paying a subscription fee that provides a recurring source of revenue for Amazon, Prime members also are heavy shoppers on Amazon. A Bank of America survey found that Prime members spend an average of $1,968 on Amazon shopping annually, which was about four times as much as the regular shopper. The majority of Prime members stream shows and films.
Thus, the renewal of the streaming deal with Roku is important to keep Prime members happy. Moreover, the arrangement may help Amazon draw more subscribers to the lucrative program.
Wall Street’s Take
RBC Capital’s Brad Erickson recently reiterated a Buy rating on Amazon with a price target of $4,000, which indicates 18.8% upside potential.
Consensus among analysts is a Strong Buy based on 34 Buys and one Sell. The average Amazon price target stands at $4,143.76 and implies upside potential of 23% to current levels. Shares have gained 4.5% over the past year.
Stock Investors
TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Amazon, with 6.1% of portfolios tracked by TipRanks increasing their exposure to AMZN stock over the past 30 days.
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