Roku Is 'Redefining Video Monetization,' Analyst Says In Stock Upgrade

The acquisition of Nielsen’s advertising assets has boosted Roku Inc's ROKU competitive advantage and growth potential, according to KeyBanc Capital Markets.

The Roku Analyst: Justin Patterson upgraded Roku's stock from Sector Weight to Overweight, while establishing a price target of $518.

The Roku Thesis: The Nielsen NLSN acquisition has expanded Roku’s total addressable market, Patterson said.

“Previously, Roku was capturing over 3.5 hours/day of digital viewership (although not all of it was monetizeable),” the analyst wrote in a note.

After acquiring Nielsen’s advertising assets, “Roku can now monetize the other 2.5-3 hours/day on linear TV,” which can drive ARPUs (average revenue per user) and the company’s positioning with programmers, he added.

See Also: BofA Likes Roku's Deal To Acquire Nielsen's AVA Business

“Roku's headcount in R&D alone is approaching 1,000 employees," Patterson wrote. "In our experience, strong R&D cultures often yield continuous platform improvements that extend leads over competitors. When paired with effective AdTech, the monetization and margin potential can be material. We are increasingly less concerned of competitive disruption."

ROKU Price Action: Shares of Roku traded higher by 1.6% to $396 in premarket trading Wednesday.