Roku is getting big enough to be a buyout target. Here is who could want it

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The rapid increase in the value of
Roku

ROKU has been hard to ignore in 2018. And as the company grows, large companies may begin to circle for a potential buyout.

This could mean the interest of a range of companies, including
Amazon.com

(AMZN), but also large Internet companies such as
Facebook

(FB) and
Alphabet
"S
(GOOGL) Google, and even
Verizon Communications

(VZ) and
AT & T

(T), according to a new analysis.

And if Roku finally decided to sell, according to Needham & Co."S Laura Martinothers might try to embark on a softer agreement. "Once a party says," I buy it under the rest of you, "the others will show up," Martin said in an interview Monday.

Martin on Monday raised his Roku stock price target from $ 60 to $ 85. the stock was more than $ 76 at the close following a rise of nearly 5% in Monday's session. His new target is the highest on Wall Street, according to FactSet. She maintained her odds of buying on the stock.

"Since its IPO, Roku has demonstrated: excellence in execution; total expansion of the addressable market; transferred experimental advertising budgets to traditional advertising budgets; reduces capital intensity and competitive risk; To have good luck; and positions itself as a key strategic takeover objective "on top", "wrote Martin. ("Over the top" or "OTT" refers to streaming video directly to the consumer.)

As a category, video entertainment devices are expected to grow rapidly. IDC announced Monday compound annual growth of 36% over five years until 2022, surpassing that of other types of smart appliances.

IDC

Roku, which is part of Barron's Next 50 index, grew by 48% in 2018, as the company demonstrated both growth and the ability to diversify its revenue stream.

For some investors, this is an alternative
Netflix

(NFLX) pure-play bets on video streaming – which increases its attractiveness as a possible target. This is partly the reason why short-seller Andrew Left has optimized for the title earlier this year.

For Roku, this could give rise to a scenario in which Roku would accept a friendly offer while leaving a margin in the merger agreement for someone else to come and offer us a better deal, said Martin. (If it sounds familiar, you may be thinking of the recent
Sirius XM Holdings

(SIRI) deal to buy
Pandora Media

(P).)

Martin regards Amazon as the most likely buyer. Roku, she told Barron's Next, will expand her position with video streaming clients already built with Prime Video and Fire devices.

In addition to the giants of the Internet, media companies could be options such as, for example,
CBS

(CBS) or
Viacom

(VIAB) – or conglomerates such as AT & T, owner of Warner Media, and Verizon.

"We think Roku would benefit many companies strategically," Martin wrote. "Given that time to market is critical to the mission and that it has taken Roku more than 10 years to build its platform, we believe that larger companies are more likely to be able to use it." try to buy Roku only to spend years developing their own platform, until Roku is bought by someone else. "

Email David Marino-Nachison at [email protected]. Follow him to @marinonachison and follow Barron's Next to @barronsnext.