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Roku Has 33% Upside on Monetization Potential After Nielsen Acquisition, Analyst Says

By Rich Duprey - Updated Mar 3, 2021 at 11:12AM

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The market didn't seem to like the deal, however.

The acquisition by Roku (ROKU -2.76%) of the advertising business of TV ratings leader Nielsen (NLSN 0.24%) will give the streaming star a massive monetization boost for its programming, one analyst believes.

According to Justin Patterson of KeyBanc, the purchase of the ad-targeting technologies expands Roku's total addressable market and should increase its platform revenue by 50% through 2022.

He's raising his price target on Roku to $518 per share, suggesting there's 33% upside in the streamer's stock, which closed down 7% yesterday at just under $390 per share.

Woman scrolling through Roku programming

Image source: Roku.

The all-seeing eye

The deal between Roku and Nielsen is seen as beneficial for both parties because it allows the former to accelerate its ad insertion technology with TV programmers while broadening the latter's content-measurement capabilities across the Roku ecosystem.

In his research note to clients, Patterson said, "Previously, Roku was capturing over 3.5 hours/day of digital viewership (although not all of it was monetizable)." But with the addition of Nielsen's targeted-advertising capabilities, he said, "Roku can now monetize the other 2.5 to 3 hours/day on linear TV."

Because of the arrangement, media buyers and sellers will get better measurement of what their ads are doing across the Roku platform, especially through the nearly 100 million Roku smart TVs.

By better monetizing its platform, Patterson says, Roku increases its positioning with media programmers and should see increases in average revenue per user.

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Stocks Mentioned

Roku Stock Quote
$94.20 (-2.76%) $-2.67
Nielsen Holdings plc Stock Quote
Nielsen Holdings plc
$25.50 (0.24%) $0.06

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