Amazon-Roku Ad Tech Deal Helps Fix ‘Critical Pain Point’ In CTV Fragmentation, Says Ark Invest: ‘Major Leap Forward In Data-Driven TV Advertising’

Cathie Wood’s Ark Invest is increasingly bullish on the connected TV (CTV) partnership forged between e-commerce giant Amazon (AMZN) and streaming devices company Roku (ROKU) last week.

In Ark’s Weekly newsletter, analyst Nicholas Grous said the collaboration should help solve a critical pain point in CTV-fragmentation by allowing marketers to “manage frequency, deduplicate reach, and measure outcomes more accurately than ever before.”

The alliance allows an exclusive integration that will give advertisers access to the “largest” authenticated CTV audience, which numbers an estimated 80 million U.S. households. Grous said this would potentially transform the U.S. CTV advertising market and eventually the global CTV advertising market. 

He said that despite the collapse in linear TV’s reach, it still accounted for $165 billion in global advertising, with $60 billion of that coming from the U.S.

Grous said, “The new solution should debut to all Amazon Demand Side Platform (DSP) users in the U.S. by the third quarter, marking a major leap forward in data-driven TV advertising.”

Amazon DSP is a programmatic ad tool that allows advertisers to purchase ad space across the internet, including Amazon's own websites and apps, as well as third-party publisher sites.

The analyst noted that early tests of the partnership delivered impressive results, adding that the improved identity and cross-device targeting have helped brands achieve three times more value from their ad spend without increasing their budgets.

He added that it has also helped reduce repeated, often annoying ads by about 27%. 

Wall Street analysts also expressed optimism regarding the deal. Last week, Citi upped its price target for Roku stock to $84 from $68 but maintained a ‘Neutral rating,’ The Fly reported. The price target hike came on the back of the Amazon partnership. 

The firm said the alliance improves Roku's competitive positioning in the CTV space and gives "incremental confidence" in the company's growth trajectory. It also raised its estimates for Roku, factoring in the new partnership.

However, Citi believed the benefits of the tie-up had already been priced into the shares.

Loop Capital upgraded Roku to ‘Hold’ from ‘Buy’ and raised the price target for the stock to $100 from $80, premised on its view that the Amazon partnership would begin to positively impact the company’s financial results starting next year.

BofA also upped its price target for the stock to $100 from $85.

Roku is the fourth biggest holding of Ark’s flagship Ark Innovation ETF (ARKK), accounting for about 7.26% weighting in terms of value.

On Stocktwits, retail sentiment toward Roku has deteriorated to ‘bearish’ by late Monday from ‘neutral’ a week ago, with the message volume tapering off to ‘normal.’

Roku stock ended Monday’s session down 0.11% at $80.90, although it is up about 9% year-to-date.

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