Roku Shares Explode as HBO Max Launches on the Platform

Roku Inc. shares were soaring to a new all-time high on Thursday as the company finally came to an agreement with AT&T Inc. to add HBO Max to its streaming platform.

The move led to a slew of analysts increasing their price targets on Roku shares.
Benchmark analyst Daniel Kurnos reiterated a Buy rating on Roku’s stock with a price target lifted from $300 to $410.

BofA Securities analyst Ruplu Bhattacharya maintained a Buy rating on Roku with a price target lifted from $360 to $380.

According to Benchmark, Roku and HBO’s agreement shouldn’t come as a surprise although the addition of Peacock first was “somewhat perplexing.

Analyst Daniel Kurnos believes that nevertheless, confirmation of a deal with HBO will help generate a “significant” upside versus expectations moving forward.

Kurnos projects that Roku should achieve an average Advertising Video On Demand (AVOD) average revenue per user (ARPU) of $18 in the fourth quarter and close to $20 in 2021. This translates to total AVOD revenue growth of more than 90% year-over-year.

“The two recent deals are more meaningful than just the inventory they provide, as part of the prior bear thesis was centered on Roku losing negotiating leverage over time,” the analyst wrote.

According to BofA, Roku scored a victory by adding HBO to its platform as it will help generate new viewership, scale and revenue. Analyst Ruplu Bhattacharya said HBO benefits by gaining access to Roku’s 46 million active accounts and 100 million people.

Financial terms of the deal were not disclosed.

For users with the current HBO app, the channel will automatically update to HBO Max. Otherwise, Roku users will be able to download the HBO Max channel on their Rokus.

Existing users can log in using their current credentials, while new users can sign up through the app for $14.99 a month.

Recently AT&T CEO John Stankey said HBO Max now has 12.6 million users. Roku has more than 46 million active accounts which could boost these numbers.
Shares of Roku hit a new all-time high of $352.12 early in Thursday’s session.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.