Roku is threatening to end support for Google’s YouTube TV app. A Bloomberg report alleges that the connected-TV platform has already begun notifying its customers that they may lose access to the streaming service. Roku’s shares gained 3.3% in yesterday’s trading session.
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According to the Bloomberg report, negotiations between Roku (ROKU) and Alphabet’s (GOOG) Google have hit a brick wall. The bone of contention is Roku’s allegations of Google’s unfair terms, which it says could harm its users.
The Bloomberg report claims that Roku can no longer stand for Google’s unfair and anti-competitive practices that often result in the search giant manipulating search results. According to Roku, “Google’s unfair and anticompetitive requirements to manipulate your search results, impact the usage of your data and ultimately cost you more.” YouTube TV’s contract with Roku is expected to expired in the next few days.
This is not the first time that Roku has been entangled in a bitter standoff with streaming services on the platform. AT&T’s (T) HBO Max was kept off the platform last year. The dispute was settled, and the service was allowed back in December. Comcast (CMCSA) was also forced to strike an agreement for its Peacock streaming service to be supported on the connected-TV platform.
Roku shares are up 10% year-to-date after a 149% pop in 2020. (See Roku stock analysis on TipRanks).
After an impressive start to the New Year followed by a pullback, BofA analyst Ruplu Bhattacharya believes the stock still has some room to move upward. According to the analyst, Roku has tremendous opportunities for growth made possible by its online platform. Expansion of the in-house Roku Channel through content purchases should also continue to strengthen the company’s prospects.
“In addition to targeting the households that do not have any connected TVs (16mn US, 9mn UK), Roku has the opportunity to grow its share of the Smart TV and Digital Media Streamer markets as the installed base of Smart TVs and media streamers comes up for replacement” Bhattacharya wrote.
The analyst has since reiterated a Buy rating on the stock with a $500 price target implying 35.64% upside potential to current levels.
Wall Street is cautiously optimistic on Roku going by the Moderate Buy consensus rating based on 14 Buy, 5 Hold, and 1 Sell recommendations. The average analyst price target of $476.95 implies 29.38% upside potential to current levels.
Roku scores a 7 out of 10 on the TipRanks’ Smart Score rating system, implying that it is expected to perform in line with market expectations.
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