Roku – Why NOW?
One thing's for sure, it's no longer off everybody's radar. But are they selling too cheaply? Answer: Follow the money....
▶This quick comment: I was going back/forth with a subscriber who first mentioned ROKU ROKU 0.00%↑ to me…
He’s disappointed in the Fox deal to acquire the company for cash/stock at $160 because, based on his analysis, he saw upside of more than $200. (And that’s being conservative based on his longer-term view.)
He bases that on the combo of Roku’s earnings trajectory and cash generation, with the additional bonus of the company ultimately going into the S&P 500.
His concerns were validated when Fox, in a sense, said the quiet part out loud in its press release this morning, reiterated on a call held with analysts to discuss the deal, when it referred to the “high-growth” nature of Roku. That’s something laid out in my original Roku report.
As it turns out, my subscriber wasn’t the only one wondering why the company was being sold… now. On the call, analyst Rich Greenfield of Lightshed Partners specifically asked that question of Roku founder/CEO Anthony Wood…
Anthony, you mentioned that you ran a strategic review. I think we've long believed you were going to sell the company and that there were buyers. What triggered you to want to do a strategic review in 2026? Why this year versus last year? Your growth is accelerating. Why not next year? Why was this the exact right moment to sell?
Wood responded, but with a dodgeball kind of answer that arguably could have raised even more questions about the timing from an investor’s perspective…
First of all, you’re right. I have never been more positive about our business than I am now. If you just look at where we are in the world, the number one streaming platform in the U.S., over 100 million streaming households, over half of broadband households in the U.S. using Roku to watch television. A brand that people love.
We’ve been posting strong growth quarter-over-quarter. We’re just really well strategically positioned, kind of the center of the streaming ecosystem. We are in a position of strength. There’s nothing special. You said, “Why now?” There’s nothing special about this year, but I do think that strongly that by combining the assets of Fox with what Roku has, really improves our position to continue to execute on our strategy, over the long term. We’ll accelerate progress on that strategy.
Then there was this from Fox CEO Lachlan Murdoch, who, in his scripted text, said…
Before I turn it over to Anthony, I want you all to know that the opportunity to acquire Roku at this moment, as Roku hits its inflection point of growth, is a transformational step forward for Fox and for our shareholders.
All of which gets back to the question… why now?