Roku Inc (NASDAQ: ROKU) is pushing to the upside this morning after a Guggenheim analyst said Trade Desk Inc (NASDAQ: TTD) should consider a merger with the streaming technology company.
A potential merger could help significantly elevate the market share of each company, as per Michael Morris.
Despite today’s rally, Roku stock is down more than 20% versus its year-to-date high that alludes to the challenges it’s facing as a standalone.
Why would Trade Desk want to merge with Roku?
Trade Desk ended its latest reported quarter with $1.7 billion in cash and cash equivalents that suggests it’s rather well-positioned for a potential merger with Roku Inc.
In November, the multinational announced Ventura – a new streaming TV operating system that Guggenheim believes will find it difficult to achieve significant market penetration.
But coming together with Roku could help alleviate that headwind for TTD, according to Michael Morris.
“Trade Desk could rapidly scale its OS ambitions via Roku’s 85mm+ global streaming household footprint,” he told clients in a research note on Tuesday.
Morris has a $150 price target on TTD shares that indicates potential for a more than 10% upside from here.
How may Roku stock benefit from a TTD merger
Guggenheim is convinced that a potential merger with Trade Desk will be equally beneficial for Roku Inc as well.
“Roku could quickly leverage its [TTD’s] first-party viewer data and expanding CTV inventory to match with growing advertiser demand,” the investment firm argued in its report.
All in all, its analyst is convinced the benefits of a vertical integration far outweigh the incremental challenges that these companies will likely face as separate entities.
A merger will create the most value for their shareholders over the long term as well, he added. Note that Roku stock is now up a whopping 50% versus its low in early August.
Roku shares could extend rally into the next year
Trade Desk has already been working with Roku on data-driven TV streaming since April, 2024.
The collaboration enables marketers using TTD to capitalise on Roku’s audience and the related behavioural data in pursuit of better campaign planning.
Guggenheim’s note arrives about a month after Roku came in ahead of Street estimates for its fiscal Q3 but said it will remain in loss in its current financial quarter.
But “we remain focused on growing platform revenue,” – that’s what its chief executive Anthony Wood told investors at the time.
Among notable names that are super bullish on Roku stock is Cathie Wood who loaded up on more then 0.3 million shares of the company in October.
Analysts at Cannonball Research also see upside in ROKU to $116 that translates to about a 50% upside from here.
Roku shares do not currently pay a dividend, though.
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