Roku Pops 5% On Quibi Catalog Content Deal


Roku confirmed the acquisition of Quibi Holdings, the company which holds Quibi’s content distribution rights, on January 8. However, the video streaming platform did not disclose the financial terms of the deal. Roku stock closed 5.2% higher following the announcement.

Per the deal, Roku (ROKU) gained the exclusive rights to stream over 75 shows and documentaries produced by Quibi on The Roku Channel platform. Moreover, Roku will offer this content for free to its users through an ad-supported model.

Notably, Quibi was launched in April 2020 to develop high-end, short-form content for mobile phones. However, the service didn’t take off the way the company had hoped, and in October, Quibi announced that it is planning to shut its operations and sell its assets.

Meanwhile, Roku is scheduled to report its 4Q results in February, and according to the recent preliminary figures, the streaming platform has hit the 50 million subscribers milestone.

Roku said that it would reach 51.2 million active subscribers in 4Q, compared to analysts’ expectations of 50.3 million subscribers. Roku users streamed 17 billion hours in 4Q, according to the preliminary numbers. The Street had estimated 16.3 billion streaming hours for 4Q. (See ROKU stock analysis on TipRanks)

On Jan. 8, Rosenblatt Securities analyst Mark Zgutowicz maintained a Buy rating on the stock. He said, “We expect ’21 to showcase Roku early inning eCPM [effective cost per mile] gains relative to social video, as well as the beginnings of OUS monetization.” The analyst also raised the price target from $260 to $420 (5.2% upside potential), reflecting “developing ARPU [average revenue per user] dynamics.”

Overall, consensus among analysts is a Moderate Buy, with 12 analysts rating the stock a Buy and 6 saying Hold. Only one analyst issued a Sell rating. In view of the 188.8% share rally over the past year, the average price target of $301.79 implies downside potential of about 24.4% to current levels.

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