ROKU Extends Amazon Partnership, Boosts User Engagement

Roku ROKU is benefiting from strong momentum in average revenue per user (ARPU) and improving user engagement.

The company recently announced the extension of a multi-year distribution agreement with Amazon AMZN.

Per the agreement, customers will continue to have access to Prime Video and IMDb TV on their Roku devices. However, the terms of the agreement have not been disclosed.

The deal is timed appropriately since Prime Video recently became the exclusive hub of NFL’s Thursday night football games. This will help Roku boost its user base, thereby driving the top line.

The Roku Channel is also witnessing a surge in premium subscription signups, which is a major positive. The company is also focused on expanding its Roku TV footprint globally.

Roku continues to partner with global brands to extend its TV licensing program, which is anticipated to drive Roku TV momentum.

The availability of third-party streaming channels on the Roku platform, including Discovery+, Disney’s (DIS) Disney+, HBO Max, Paramount+, NBCUniversal as well as Peacock, Amazon Prime Video, AppleTV+, Hulu and Netflix and continued investments in The Roku Channel have significantly contributed to engagement growth and strengthened the company’s brand.

Advertising Initiatives to Boost Top-Line

Roku is benefiting from advertising spend reallocation toward TV streaming as marketers accelerate their shift out of traditional TV and into TV streaming. The Roku Channel is witnessing a surge in premium subscription signups, which is a major positive.

Growth of the Roku Channel in reach and engagement drove performance in the last reported quarter. Active accounts rose 17% year over year to 60.1 million, driven by the popularity of Roku streaming players and Roku TV models. Streaming hours also rose 15% year over year to 19.5 billion.

Roku also connects content publishers to users at scale and provides a deep array of promotion tools to boost engagement and reach.

Recently, the company launched its Advertising Watermark, a free technology to help advertisers and publishers validate the authenticity of video ads originating on the Roku platform. This provides marketers with the confidence and trust that their advertising spend is reaching real Roku customers.

Roku, Inc. Price and Consensus

Roku, Inc. price-consensus-chart | Roku, Inc. Quote

Earlier this year, Roku announced the expansion of the company’s advertising business to Mexico.

The expansion will enable brands and content providers to reach more consumers through ad-supported content on The Roku Channel — the #1 TV streaming platform in Mexico.

As part of the launch, Roku partnered with Entravision, a leading global digital marketing and media company, which has local operations in Mexico, to help brands effectively reach consumers by advertising on the Roku streaming platform.

Roku also launched Nielsen’s NLSN Digital Ad Ratings (DAR) audience guarantees on OneView.

The integration of Nielsen’s DAR makes OneView the first ad-buying platform to enable Nielsen guarantees across TV streaming.

OneView, launched by Roku in May 2020, is a single platform leveraging TV identity data from the Roku TV streaming platform in the United States to manage advertising across OTT, desktop and mobile campaigns that reach a maximum audience.

In the fourth quarter, Roku’s monetized video ad impressions surged 67% on a year-over-year basis. The upside can be attributed to an increase in client acquisition, retention and spending per client.

Platform revenues (81.3% of revenues) surged 49.3% year over year to $703.6 million, driven by significant increases in content distribution activities and advertising.

Zacks Rank and a Stock to Consider

Roku currently has a Zacks Rank #3 (Hold).

Roku shares are down 41% in the year-to-date period compared with the Zacks Broadcast Radio and Television industry’s plunge of 24.1% and the Consumer Discretionary sector’s fall of 12.7%.

A better-ranked stock in the Zacks Consumer Discretionary sector is SeaWorld Entertainment SEAS, sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

SEAS shares are up 8% in the year-to-date period compared with the Zacks Leisure and Recreation Services industry’s plunge of 4.7% and the Consumer Discretionary sector’s fall of 12.6%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.