Analysts have said that Roku is set to take on a large portion of the TV ad market, while Netflix will struggle with competition from subscribers once the streaming wars are fully underway.
Needham analysts have estimated that Roku reaches 80 million Americans, and described it as the ‘dominant internet aggregator for streamed TV & movie content, like YouTube is for user generated content.’
The analysts have said that investors who want to bet on streaming video would be better off going with Roku than Netflix due to the current and future status of the market. Shares on Roku stock recently rose, with Needham raising its price target up from $120 to $150.
Roku provides a hub for accessing video services on an ad-supported platform. Targeted advertising is released to customers, but it doesn’t charge subscriptions. The service also doesn’t spend large amounts of money on content like Netflix and Hulu. However, it does have a say in agreements with the streaming services it directs users to in terms of revenue sharing.
New streaming services which will require subscriptions are set to come in from Disney, Apple, NBCUniversal and Warner Media. Furthermore, Disney will offer a bundle which combines its new service Disney+ with ESPN+ and Hulu, which will compete with standard Netflix plans when it comes to pricing.
While the Needham analysts have stated that Netflix “has the most to lose unless you believe that US homes will add 3, 4 or 5 new [streaming video] services,” this new branch of competing services could end up working to Roku’s advantage.
In Roku’s most recent earnings report, it was revealed that the company gained revenues of $250 million in a single quarter. Furthermore, Roku is up more than 300% to date, while Netflix has only risen 15% in comparison.
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