Roku Inc. (NASDAQ: ROKU), is on the rise today after Guggenheim analysts said Trade Desk Inc. (NASDAQ: TTD), should look into a possible merger.
Michael Morris says that a merger between two companies could significantly increase the market shares of both.
Roku’s stock has fallen more than 20 percent from its high for the year, which is a sign of the difficulties it faces as an independent company.
Why would Trade Desk merge with Roku?
Trade Desk’s latest quarter ended with cash and cash-equivalents of $1.7 billion, which suggests that it is well-positioned to merge with Roku Inc.
The multinational released Ventura in November – an operating system for streaming television that Guggenheim thinks will struggle to gain significant market share.
Michael Morris says that combining TTD with Roku can help to alleviate this headwind.
In a Tuesday research note, he said that Trade Desk’s OS ambitions could be quickly scaled up by Roku’s global footprint of 85 million+ streaming households.
Morris’ $150 price target for TTD indicates a potential upside of more than 10% from this point.
What may Roku’s stock gain from the TTD merger?
Guggenheim believes that Roku Inc will also benefit from a possible merger with Trade Desk.
The investment firm stated in its report that “Roku can quickly use its first-party data [TTD] and expand CTV inventory” to meet the growing demand of advertisers.
Overall, the analyst believes that the advantages of vertical integration outweigh any incremental challenges these companies may face as independent entities.
He added that a merger would also create value over time for the shareholders. Roku’s stock has risen by a staggering 50% since its August low.
Roku stocks could continue to rally in the coming year
Trade Desk and Roku have been working together on data-driven streaming TV since April 2024.
This collaboration allows marketers to use TTD in order to better plan their campaigns by leveraging Roku’s audience data and related behaviour.
Guggenheim’s note comes about a week after Roku beat Street expectations for its Q3 fiscal but announced that it would continue to lose money in the current quarter.
Anthony Wood, the company’s chief executive at that time, told investors: “We remain focused on increasing platform revenue.”
Cathie Wood is one of many notable investors who are extremely bullish about Roku. She bought more than 0.3 millions shares in the company last October.
Cannonball Research analysts also expect ROKU’s price to rise to $116, which is a roughly 50% increase from where it currently stands.
Roku does not pay dividends at the moment.
As updates occur, this post Roku stocks rallys on merger speculation might be updated.
