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Roku Moves a Step Closer to Taking Out Linear TV, Says Top Analyst

Two leaders strike a mutually beneficial deal which is equally beneficial to a third party. No, unfortunately, we’re not announcing the end of the US-China trade war and how the resolution affects various industries.

Instead, we’re talking about two market leaders. Streaming platform heavyweight Roku (ROKU) has entered into an agreement with supermarket giant Kroger. Roku will use the grocery chain’s shopper data in its recently launched shopper data program. Apart from the benefits each company will reap, the move is good news for CPG (consumer packaged goods) marketers, too.

So, how will each point in this triangle gain from the new partnership?

Let’s start with Roku. As more consumers make the move to cord cutting services, one of the company's goals is to lure advertisers away from linear TV. Boosting its targeting abilities by using Kroger’s leading data science KPM (Kroger Precision Marketing) program, Roku will be able to move closer to this long-term goal.

Additionally, because the ads are better targeted, and therefore more valuable to advertisers, Roku will be able to charge more money for each separate ad run on its devices.

From the CPG marketers’ perspective, brands will be able to use the data from Kroger’s KPM platform to better target the approximately 40 million households using Roku, thus enabling them to better gauge which ads viewers are more likely to respond to.

And Kroger? The largest supermarket chain in the US will benefit by being able to collect more data on consumers, based on their viewing behavior, than it would be able to gather just by following behavior in stores.

5-star Rosenblatt analyst Mark Zgutowicz believes the partnership “moves Roku a step closer to CPG TV budgets.”

Zgutowicz said, “Roku shopper data program, launched with one of the largest global grocery retailers, shows significant potential to alleviate friction between linear and CTV ad buys. CPG advertisers can now extend Kroger’s massive data and analytics complex, Kroger Precision Marketing (KPM) covering 60 million US households, to Roku’s comparable first-party data scale (~40 million households), measuring incremental POS lift. We look forward to hearing specifics on CPG beta tests and additional shopper data program partnerships.”

As a result, Zgutowicz keeps a Buy rating on Roku, accompanied by a $145 price target. The implication for investors? Upside potential of 27% from current levels. (To watch Zgutowicz’s track record, click here)

How about the rest of the Street’s view? Looking at the consensus breakdown, 8 Buys, 5 Holds and 2 Sells coalesce into a Moderate Buy consensus rating for Roku. At $123.93, the stock-price forecast suggests the analysts forecast potential upside of 9% in the year ahead.

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