What Happened?
Shares of streaming TV platform Roku (NASDAQ: ROKU) jumped 8.2% in the afternoon session after the company announced an exclusive partnership with Amazon Ads, creating what they describe as the "largest authenticated Connected TV (CTV) footprint in the U.S.". This partnership is expected to give advertisers access to a combined audience of 80 million connected-TV households through Amazon's ad-buying system. The deal is also expected to improve Roku's advertising revenue and strengthen its competitive position in the streaming and connected TV market.
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What The Market Is Telling Us
Roku’s shares are extremely volatile and have had 33 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock gained 15.7% on the news that the company reported strong fourth-quarter 2024 results that easily cleared analysts' sales, EBITDA, and earnings expectations.
Revenue grew 22% year on year, driven by a 25% increase in platform revenue, which benefited from higher advertising demand, including political ad spending, and deeper third-party platform integrations.
However, its revenue outlook for the next quarter and the full year merely met Wall Street's expectations, raising questions about the staying power of platform revenue growth, especially as political ad spending recedes in 2025. The profit outlook was more encouraging as full-year EBITDA guidance came in well above Wall Street estimates.
Still, we think this was still a solid quarter with some key areas of upside. Following the impressive performance, Wells Fargo upgraded the stock's rating from Hold to Buy, adding, "We walk away from 4Q′24 much more bullish on [forward] upside driven by inventory growth, homescreen innovation and political tailwinds in' 26/'28.".
Roku is up 8% since the beginning of the year, but at $80.45 per share, it is still trading 18.8% below its 52-week high of $99.07 from February 2025. Investors who bought $1,000 worth of Roku’s shares 5 years ago would now be looking at an investment worth $665.92.
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