Roku Inc (NASDAQ: ROKU) stock soared 17.67% on September 21st, 2020 (Source: Google finance) after the company announced that NBC’s Peacock streaming service is now be available on its platform. Peacock, which is owned by Comcast Corp. provides a free version as well as paid tiers. The subscribers would now be able to pay up to access more content and remove ads. Certain Xfinity TV and internet customers get free or discounted access to Peacock. The ad sharing agreement in the Peacock deal is expected to be a benchmark for others.
There are over 15 million people signed up for Peacock since its national launch in July and the company is thrilled that millions more will now be able to access and enjoy Peacock along with other NBCUniversal apps on their favorite Roku devices. Meanwhile, Roku was seeking content for the Roku Channel, ad inventory across the NBC owned apps, and integration of their ad technology. Currently no terms of the deal were discussed but Roku said the partnership with NBC Universal, a Comcast Corporation, has included the term of adding NBC content to The Roku Channel and a meaningful partnership around advertising. Rosenblatt Securities analyst Mark Zgutowicz anticipates this deal as a positive for Roku as it gains Peacock ahead of rivals and now has leverage on future deals with other streamers. Further, the Peacock carriage agreement is its first with a major ad-supported CTV platform as neither Fire TV or Samsung TV Plus have negotiated carriage.
On the other hand, Roku is currently in negotiations with AT&T Inc’s Warner Media over the HBO Max streaming service. Zgutowicz believes Roku now has leverage on this deal and future deals to gain ad-supported subscription carriage and revenue share.
Moreover, despite pandemic, the company is confident in the ability to grow the ad business, albeit not as much as the company would have expected prior to the pandemic, as marketers re-allocate spend and follow consumers in the shift to streaming. As a result, despite the potential reasons for variability listed above, the company anticipates that the overall revenue will grow substantially on a year-over-year basis in the second half and for the full-year 2020. The company has already raised approximately $350 million in incremental equity capital to improve its cash and liquidity position. The company has ended Q2 with $887 million of cash, cash equivalents, restricted cash and short-term investments and has approximately $70 million of available liquidity under the credit facility.