On Tuesday, Walmart revealed it has decided to acquire VIZIO for $11.50 per share in cash, meaning an equity value of around $2.3 billion.
The recent news of Walmart’s intentions to bolster its media and advertising presence, particularly through its acquisition of Vizio, has sent ripples through the industry, affecting companies like Roku.
Roku, known for its streaming devices, experienced a significant drop in its stock price following the announcement of Walmart’s acquisition of Vizio.
Stock Performance
Roku’s stock (NASDAQ: ROKU) saw a decline of 6.6% in response to the news, compounding its recent downtrend following its fourth-quarter earnings report.
The initial rumors of the deal on February 13 also caused Roku’s shares to plummet by more than 8%. Year-to-date, Roku’s stock has experienced a decline of 26.8%, indicating growing concerns among investors and analysts about the company’s prospects.
Overview of Roku and Vizio
Roku’s streaming devices enable users to access a wide range of entertainment content, including TV shows, movies, and online videos, through internet connectivity.
These devices provide access to various streaming services such as Netflix, Hulu, and Disney+.
On the other hand, Vizio is a consumer electronics company specializing in audiovisual products, particularly smart TVs, soundbars, and home theater systems.
Analyst Perspectives
Despite the negative market reaction, analysts at Needham & Company maintain a bullish outlook on Roku stock, affirming a Buy rating and a $100 price target.
They believe that the negative impact on Roku shares following Walmart’s acquisition of Vizio is exaggerated and see several potential upside drivers for Roku.
Guggenheim analysts, however, have a Neutral rating on Roku with a $72 per share price target.
Investment Considerations
Needham & Company considers Roku a promising investment opportunity, citing factors such as ad revenue growth.
They argue that Walmart’s advertising strategy, targeting a different market segment than Roku’s Connected TV (CTV) ad product, could actually benefit Roku by reducing competition in the CTV market.
Additionally, they believe that Walmart’s focus on lower funnel ad strategies will complement Roku’s upper funnel target market.