Roku Gets Peacock Ahead Of Rivals And Gains Streaming Leverage

Roku Inc ROKU shares are rallying after announcing a new partnership with NBC Universal, which includes the Peacock streaming service.

What Happened: Roku and NBC Universal, a Comcast Corporation CMCSA company, announced a new partnership. The deal will see NBC Universal’s recently launched Peacock streaming service come to Roku devices for the first time.

“We are pleased to have reached an agreement with Comcast that will bring Peacock to Roku customers and maintains access to NBCU’s TV Everywhere apps,” a Roku spokesperson said.

“More than 15 million people signed up for Peacock since its national launch in July and we are thrilled millions more will now be able to access and enjoy Peacock along with other NBCUniversal apps on their favorite Roku devices,” an NBCUniversal spokesperson said.

Why It’s Important: Roku was said to be seeking content for the Roku Channel, ad inventory across the NBC owned apps, and integration of their ad technology, according to The Streamable. No terms of the deal were discussed but Roku said the partnership, “includes adding NBC content to The Roku Channel and a meaningful partnership around advertising.”

Rosenblatt Securities analyst Mark Zgutowicz sees this deal as a positive for Roku as it gains Peacock ahead of rivals and now has leverage on future deals with other streamers.

“The Peacock carriage agreement is its first with a major ad-supported CTV platform as neither Fire TV or Samsung TV Plus have negotiated carriage,” Zgutowicz wrote in a note.

Roku is currently in negotiations with AT&T Inc's T Warner Media over the HBO Max streaming service. Zgutowicz believes Roku now has leverage on this deal and future deals to gain ad-supported subscription carriage and revenue share.

“Further we believe ongoing ad tech woes lean Max ad-supported negotiations in Roku’s favor,” Zgutowicz said of the upcoming ad-supported HBO Max tier expected to launch in next spring.

Zgutowicz reiterates a Buy rating on Roku with a price target of $195.

What Other Roku Analysts Are Saying: Citi analyst Jason Bazinet initiated a Buy rating and $180 price target on Roku in August. Bazinet believes Roku can increase its current 43 million active accounts to 125 million.

Bazinet also believes average revenue per account will increase from $23 in 2019 to $32 in 2022, due to increasing ad revenue.

Deutsche Bank initiated a Buy rating and $185 price target in August.

“The ad sharing agreement in the Peacock deal could be a benchmark for others,” Deutsche Bank analyst Jeffrey Rand said Monday.

ROKU Price Action: Roku shares are up 16% to $186.30, hitting a new 52-week high earlier in Monday’s trading session.