Roku under pressure after Trade Desk reveals new streaming TV OS

Shares of Roku (ROKU) are slipping in morning trading after Trade Desk (TTD) announced that it has developed Ventura, a new streaming TV operating system expected to be deployed next year. Noting that it believes the competitive Connected TV operating system landscape will be changing in 2025, Wedbush says it would still be years for the “Ventura” OS to catch up to Roku and Amazon (AMZN) in terms of household users. 

NEW STREAMING TV OPERATING SYSTEM: Trade Desk announced that it has developed Ventura, a new streaming TV operating system. Trade Desk will partner with smart TV original equipment manufacturers and other streaming TV aggregators to deploy Ventura, the company said earlier in a statement. “Ventura represents a major advance in streaming TV operating systems as it solves key issues with prevailing market systems today, including frustrating user experiences, inefficient advertising supply chains, and content conflicts-of-interest,” it added. Trade Desk expects that Ventura will be deployed by manufacturers and other streaming TV aggregators as early as 2025.

COMPETITIVE LANDSCAPE: Wedbush notes the competitive landscape for CTV OS’s will be changing in 2025, with Trade Desk launching a new Connected TV OS and potentially adding real competition to the market. Trade Desk said that its new operating system will not be deployed until 2025, meaning this will not impact 2024 holiday CTV sales, the firm adds. Wedbush says that Trade Desk is “clearly looking to replace the various clunky user interfaces across the CTV landscape,” but this will surely take time to get off the ground to become any sort of competitive threat to Roku in terms of user base. The firm further argues that it thinks the competitive threat will build over time, assuming Trade Desk’s OS is in fact user-friendly and that it forms partnerships with most or all of the major OEM competitors. In the best-case scenario for Trade Desk, it would still be years for its “Ventura” OS to catch up to Roku and Amazon on household users, Wedbush adds. The firm has an Outperform rating on Roku with a price target of $85 on the shares.

CTV TO REMAIN A LARGER GROWTH CONTRIBUTOR: Of note, Truist hosted a product demo for Kokai, Trade Desk’s latest version of its media buying platform aimed at enhancing programmatic ad effectiveness. While still being rolled out, Kokai is already driving more data usage, leading to greater reach and improving ROAS for advertisers, and should prove accretive to the company’s FY25 take rate, the firm says. Management remains confident that it will achieve a 100% roll-out for all advertisers by the end of 2025, while inching towards 50% adoption currently. Although the stock is up 66% year-to-date, it remains one of Truist’s favorites heading into 2025. Truist remains constructive on the long-term trajectory of Trade Desk’s business and believes it is riding many secular waves in the digital ad market, especially CTV but also Retail Media, Audio and international. Near-term, the firm expects CTV and Retail Media to remain the larger contributors to growth. Truist has a Buy rating on Trade Desk with a price target of $135.

PRICE ACTION: In morning trading, shares of Trade Desk have gained almost 4% to $123.62, while Roku’s stock has dropped about 8% to $67.99.