The Walt Disney Co.’s release last week of details about the upcoming Disney+ subscription streaming service gave Disney stock a boost, and now an analyst said it could give Roku a lift as well.
Disney said it has reached a deal to give Disney+ prominent display with Roku users. Laura Martin of Needham & Co., in a research note Tuesday, said that Roku will get a share of the revenue generated by people signing up for the new service.
That revenue share plus an increase in advertising could be worth $200 million a year and could boost the market value of Roku by 15% or $1 billion, according to Martin.
Martin calculates that Roku gets between 20% and 30% of subscription revenue when one of its users downloads an app. Disney expects Disney+ to have 20 million to 30 million U.S. subscribers by 2024 at a price of $6.99 a month, or $69 a year.
Roku is in 27 million homes, or about 20% of the U.S. “If Roku holds ‘share’ and signs up 20% of Disney’s projected 20-30 million U.S. subs, it implies Roku would sign up 4 million to 6 million subscribers between 2020 and 2024, which implies added revenue to Roku in 20204 of $87 million," Martin said.
“We also project additional advertising revenue,” Martin added. She estimates Roku’s ad revenue at $275 million in 2018. “By 2024, we expect Disney to be spending $500 million marketing its Disney+ services, of which 20% could go to Roku, representing $100 million of incremental ad revenue upside in 2024.”
Roku stock was up more than 3% in early trading Tuesday.