By Emily Bary
Analyst says Disney+ could add $1 billion to Roku's current valuation
Needham analyst Laura Martin reiterated her bullish view of Roku Inc. shares on Tuesday, writing that Walt Disney Co.'s planned launch of a dedicated streaming service could be the "next $1 billion upside driver" for the company.
Martin is expecting the fall arrival of Disney+ (), the new streaming service, to be a key catalyst for Roku's stock (ROKU), with the potential to add $187 million in new revenue for the company in 2024, made up of both subscription revenue and marketing spending from Disney (DIS). When Martin discounts this projection to 2020, she calculates revenue value of $135 million for next year and deems that the launch could add almost $1 billion to Roku's current valuation.
Roku shares are up 3% in premarket trading.
Don't miss: People may be reaching their limit on streaming services ()
Martin argued that the Disney+ launch could have implications across the streaming landscape. She estimates that Netflix pays Roku the lowest fees of the various streaming players for each new subscriber that Roku signs up, but she expects that the Netflix economics could improve once there's more competition in the space. Netflix might have to buy more ads on Roku's platform to generate new subscribers if existing ones leave for rival services, in Martin's view.
Read: Disney's most outspoken bear reluctantly upgrades the stock ()
Nonetheless, she referred to Netflix as "Roku's past, not its future," since the company benefits more if subscribers leave Netflix and join other streaming services through the Roku platform.
Martin has a buy rating and $85 price target on the stock, which she calls her top pick for the year. Shares are up 42% over the past three months, while the S&P 500 has gained 11%.
-Emily Bary; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
April 16, 2019 08:58 ET (12:58 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.