Wall Street analysts responded positively to news that streaming video platform Roku (ROKU) has acquired the popular home-remodeling series “This Old House” as part of its push into exclusive and original content. Roku stock rose on Monday.
San Jose, Calif.-based Roku announced Friday that it had purchased TOH Intermediate Holdings, which owns the “This Old House” business, from TZP Group. Roku did not disclose the financial terms of the deal. With the purchase, Roku gets the show library, all digital assets and a television production studio. Roku intends to continue making new episodes of “This Old House” and spinoff series “Ask This Old House.”
“This Old House,” which marked its 40th anniversary in 2019, is the top-rated home improvement program in the U.S., according to Nielsen data, Roku said. Past seasons of “This Old House” and “Ask This Old House” are already available for free on the ad-supported Roku Channel.
Roku’s purchase of “This Old House” follows two other recent content acquisitions. In January, Roku acquired the content library of defunct streaming service Quibi. Earlier this month, Roku bought the U.S. and Canadian streaming rights to action-drama series “Cypher.”
Roku Stock Has High Relative Strength Rating
“We believe that the types of incremental content investments we have been making are commensurate with the scale and growth trajectory of The Roku Channel,” Rob Holmes, Roku vice president of programming, said in a news release.
Roku stock has an IBD Relative Strength Rating of 91. That means it has outperformed 91% of stocks over the past 12 months.
‘This Old House’ Purchase Called ‘Clever Deal’
Needham analyst Laura Martin on Monday reiterated her buy rating on Roku stock with a price target of 550.
She called the acquisition of “This Old House” a “clever deal for Roku.”
“Roku sells audiences, but the largest brand advertisers on linear TV buy specific content, normally during the upfront market in July, when 70%-80% of their ad budgets are committed each year,” she said in a note to clients. “By owning Quibi content plus 1,500 hours of ‘This Old House’ content, Roku may have better luck getting commitments from brands during the upfront market, instead of fighting for the 20% of their ad budgets in the scatter market each year.”
Analysts Raise Caution Flags On Content Strategy
D.A. Davidson analyst Tom Forte maintained his buy rating on Roku stock with a price target of 560. But like Martin, Forte offered some words of caution on Roku’s content strategy.
“While we are confident in management’s ability to identify proprietary content opportunities to purchase where it believes it can generate a significant return on investment through advertising sales, we are concerned that it changes the risk profile for the stock; especially, if it needs to invest hundreds of millions of dollars, if not billions, to do so,” Forte said in a note to clients. “For that reason, we will continue to monitor its strategy and the financial implications.”
Roku stock ranks fifth out of 19 stocks in IBD’s Leisure-Movies & Related industry group. That’s according to the IBD Stock Checkup tool.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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