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Walmart partnership, takeover rumors could revive interest

Promotions of the Roku streaming platform (ROCU) are now down about 83% from their all-time high just under a year ago. Despite the severity of the downturn, ongoing pressures driven by rates, and growing competitive threats in the streaming space, innovative investor Kathy Wood isn’t ready to drop the name just yet. She may have become even more optimistic, buying stocks on the dip.

Roku: Is a Netflix takeover all it takes?

With recent rumors of a potential takeover by streaming authority Netflix (NFLKS), Roku stock seems to be back in the headlines. However, investors should take such rumors with a grain of salt. Netflix is ​​in the content business, and I doubt the firm would want to be in the streaming hardware business.

Streaming hardware is no longer the growth engine it used to be. It’s a commercial product that’s facing huge competition not only from big tech companies, but also from next-generation smart TVs that could make streaming hardware obsolete.

Is Roku facing an existential threat as it tries to make a splash in its content production? It is hard to say. I’d say Roku lacks a moat, which leaves it vulnerable to richer competitors like Amazon (AMZN).

If Netflix wasn’t in such dire straits, I’m sure the Roku-Netflix deal would make a lot of sense. With Netflix also looking to turn around and rebuild its previously rich multiplier valuation, I’d say the firm is more likely to go down the path of organic innovation rather than pick up another firm with more than its fair share of baggage.

It’s hard to remain bullish on Roku stock at these depths due to the seeming lack of catalysts. However, I remain optimistic, as the 3.8 times sales multiple is absurdly low and undervalues ​​the firm’s recession resilience. And let’s not forget that Roku can solve its problems through innovation. After all, Roku is Cathy Wood stock!

For these reasons, I remain optimistic, even though most other investors are anti-equities.

On TipRanks, ROKU scores 8 out of 10 on the Smart Score scale. This indicates that the stock may outperform the market as a whole.

Roku teams up with Walmart on intriguing ad concept

In an intriguing move, Roku announced its partnership with Walmart (TDC) to bring e-commerce to TV advertising. This is definitely not a concept that many consumers are familiar with. Still, it could pay significant dividends for both firms, especially as the US economy heads into recession.

With intriguing ads, Roku viewers can purchase items from Walmart through the Roku streaming service. While only time will tell if the partnership pays off, I find this move very interesting. And one that could mark a rise for sick streamers.

This is an innovative concept, to say the least. And one that can be copied by Amazon’s big retail and streaming services.

In addition, it’s not just ads that can entice users to buy products through the Roku platform. Product placement and strategically placed advertising could mark the next frontier in digital advertising. I think the combination of one-two product placement and the convenience of buying from Roku ads can be unstoppable.

The partnership with Walmart shows that Roku is still innovating. The company recognizes that stream sticks have become a commodity and is ready to move on. I’m a big fan of Roku’s relationship with Walmart and I think this could be the start of a very fruitful relationship where the latter can take over the former.

Recession on the way? Roku can get ahead of the competition

Roku can innovate beyond advertising; Roku is a pioneer in ad-based free streaming with its Roku channel. As the Roku channel gets more content, viewers may be flooding in, especially those who recently canceled Netflix to save money.

Perhaps the Roku Channel is one of the most inexpensive forms of entertainment (it’s actually free for Roku users), and it could start to pay off when economic times get tough.

Wall Street view

According to TipRanks analysts’ consensus forecast, ROKU shares should be bought moderately. Of the 23 analyst ratings, 17 are buy, five are hold, and one is sell.

Roku’s average price target is $152.26, which implies 84.8% upside potential. Analysts’ price targets range from a low of $80.00 per share to a high of $240.00 per share.

Bottom line on Roku Stock

While higher rates do not bode well for innovative companies like Roku, their recession resilience could more than offset potential betting-driven economic headwinds on the horizon.

Joining forces with Walmart on an intriguing new advertising concept proves that Roku is not willing to give up without a fight. If the Walmart-Roku deal looks promising, I’d say Walmart is a much better contender than Netflix.

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