Roku (NASDAQ:) stock was surging on Monday after the streaming platform announced a major deal with Amazon (NASDAQ:).
The partnership is with Amazon Ads, giving Amazon advertisers access to the 80 million U.S. households that use Roku to stream content through Amazon DSP. Amazon DSP stands for Demand Side Platform, which is the company’s platform for advertisers to reach advertisers.
Roku reported that in early tests, advertisers using Roku through this partnership reached 40% more unique viewers. That expanded reach came at roughly the same budget and reduced how often the same person saw an ad by nearly 30%. This generated roughly three times more value for advertisers from their ad spend.
“With nearly half of all TV streaming time in the U.S. happening on Roku, and the power and depth of Amazon in retail and beyond, together we’re uniquely positioned to prove performance and differentiate DSP offerings for our shared advertisers and marketers,” Charlie Collier, president, Roku Media, said.
For Roku, the partnership complements its direct sales strategy, with the potential to generate more revenue as more people use the buying platform.
“This move represents their most significant pivot toward expanding their buying platform across the [connected TV] universe,” Benchmark analyst Daniel Kurnos wrote in a research note, reported MarketWatch.
Roku Stock Rises
Both Amazon and Roku stock were rising on the news of the partnership. Roku stock jumped about 8% to around $80 per share, while Amazon stock increased 1.5% to approximately $215 per share.
“The collaboration enables agencies and brands that use Amazon DSP to benefit from greater efficiency and higher performance. We’re removing the guesswork to provide advertisers with unprecedented capabilities and delivering performance in ways that simply weren’t possible before,” Paul Kotas, senior vice president, Amazon Ads, said. “By combining our technologies, advertisers can now drive full-funnel campaign outcomes—from awareness through conversion—while eliminating media waste across Amazon and Roku streaming audiences.”
The service is expected to launch in the fourth quarter of this year.
Roku stock is up about 8% YTD and 47% over the past 12 months. It has a median price target of roughly $85 per share, which suggests about 6% upside.
In the first quarter, Roku increased its revenue by 16% year over year to $1 billion, but had a $58 million net loss. For the full fiscal year, it projects revenue of $4.5 billion and a net loss of $30 million.
Amazon stock is down about 2% YTD. It has a median price target of $240 per share, representing 11% upside.