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Roku Price Target Raised to Wall Street High After HBO Max Inclusion

Shares of Roku jump after the streaming-content provider’s price target is raised to a Wall Street-high of $410.

Shares of Roku  (ROKU) - Get Roku, Inc. Class A Report jumped Thursday after the streaming-content provider’s price target was raised to a Wall Street-high of $410 at Benchmark on expectations that the inclusion of HBO Max on the company’s platform will help boost revenue and earnings.

Roku stock gained more than 7% after Benchmark analyst Daniel Kurnos lifted his one-year price target to $410 from $300 on what he expects to be “significant upside surprise in 4Q.”

Roku and WarnerMedia on Wednesday announced an agreement to bring HBO Max to the Roku platform. As of Thursday, Roku users will be able to download the HBO Max app from the Roku channel store and subscribe directly on their Roku device to access all of HBO Max. The service costs $15 a month.

The deal allows Roku's popular lineup of streaming devices to support HBO Max's app, a breakthrough in a months-long standoff over which side had control of the data, money and programming. Roku had blacked out HBO Max's app from its service since its May launch.

While “largely the expected outcome” it shows the strength of Roku’s negotiating position and its leadership in the streaming-video industry, Kurnos wrote in a research note to clients. “As long as numbers remain easily beatable and the short interest remains elevated,” shares should continue to drift higher, he said. 

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Kurnos has a buy rating on the stock.

Indeed, with the pandemic spurring record binge-watching of shows and full-feature films, movies like "Wonder Woman 1984," "The Matrix 4" and "Dune" being available on Roku starting Thursday will help bolster Roku’s bottom line, according to Kurnos.

The pressure for HBO Max and Roku to reach a deal peaked last month after HBO Max announced it would stream all of Warner Bros.' new movies the same day as theatrical release, making them available to watch at home for subscribers at no added cost.

Each film will be on HBO Max for one month, and then the movies will leave the streaming service to be shown exclusively in theaters for a time. That strategy begins Dec. 25 with the simultaneous theater and streaming release of Wonder Woman 1984.

Telecom giant AT&T  (T) - Get AT&T Inc. Report owns both HBO Max and the Warner Bros. movie studio through its WarnerMedia entertainment unit.

Shares of Roku were up 7.5% at $350.34 in trading on Thursday.