Shares of Roku (ROKU) are surging today after Needham analysts suggested that the television-streaming platform might be a prime target for a takeover. Potential buyers could range from streaming leaders like Netflix (NFLX) to connected TV ad players like The Trade Desk (TTD). Other potential suitors could include retailers like Target (TGT) or tech giants Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOGL), which could use Roku’s data to train their large language models.
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Needham highlighted several reasons for acquiring Roku, such as its extensive user base, unique data sets, pricing power, and position as the only scalable connected TV platform available for purchase. Furthermore, it emphasized the value of Roku’s data, especially its consumer viewing habits and ad performance metrics, which Needham believes will become even more valuable as algorithms improve over time.
The report also warned that Roku should be cautious about sharing its data with partners like The Trade Desk and instead urged it to hold out for a premium acquisition deal. The analysts predict that Roku could be sold at a big premium by 2025 if the regulatory environment shifts in favor of such deals. It is worth noting that Needham, led by Laura Martin, has a Buy rating on Roku with a $100 price target.
Guggenheim Also Floated the Idea of a Merger
Interestingly, Guggenheim also recently floated the idea of a potential merger for Roku. However, it was more specific about who the acquirer should be – The Trade Desk. Indeed, the firm emphasized how their strengths could complement each other and how both companies might benefit more from collaboration rather than rivalry.
Guggenheim noted that The Trade Desk’s upcoming Ventura OS has a long way to go in order to gain a significant market presence. Nevertheless, Roku’s 85 million global streaming households and first-party viewer data could help accelerate those ambitions. In return, Roku could tap into The Trade Desk’s growing advertiser demand and strengthen its connected TV inventory.
Currently, Guggenheim, which is led by five-star analyst Michael Morris, has a Buy rating on Roku with a $75 price target.
What Is the Fair Value of Roku Stock?
Overall, analysts have a Moderate Buy consensus rating on ROKU stock based on nine Buys, 10 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 20% decline in its share price over the past year, the average ROKU price target of $79.78 per share implies 5.6% downside risk.
