Roku: Positive implications for ROKU of DIS/FOXA deal
Needham reiterates $50 tgt, reiterates Buy. Firm notes that they believe DIS's announced acquisition of certain FOXA assets for $66B, including $52B of equity is positive for ROKU because it implies two new deep-pocketed OTT networks will be added to ROKU's OTT aggregation platform, more traffic coming to the ROKU platform, and DIS spending marketing dollars with ROKU and giving ROKU a rev share for the first time ever. Also, only two services pay ROKU almost nothing (because they were first), Netflix and YouTube. They expect ROKU to successfully negotiate its normal 20% rev share with any new DIS OTT channels. Therefore, the more subs that DIS's sports or entertainment services take away from Netflix, or viewership away from YouTube, the more ROKU benefits economically from that mix shift. Also, those services might buy more advertising on ROKU to slow defections.