Shares of streaming service platform Roku (ROKU) - Get Roku, Inc. Class A Report were up 1.4% Tuesday as analysts at Needham see a major upside for the company following the debut of Walt Disney's (DIS) - Get Walt Disney Company Report new streaming service Disney+.
Disney announced that it has reached a deal that will display the Disney+ option prominently on Roku devices, a move that will get Roku a share of the revenue generated by new people signing up for the yet-to-debut service.
The deal could result in an extra $187 million a year in revenue for Roku by 2024, according to Needham analyst Laura Martin, and could add as much as $1 billion to the company's market cap.
Roku gets between 20% and 30% of subscription revenue when one of its users downloads a streaming app, Martin estimated. Disney expects Disney+ to have between 20 million and 30 million U.S. subscribers by 2024 at a price of $6.99 a month.
Disney+ will debut later this year.
Martin estimated that Netflix (NFLX) - Get Netflix, Inc. (NFLX) Report , Disney+'s main rival, pays the least for advertising on Roku's platform, but Roku's deal with Disney could force Netflix to pay up to keep up.
"We also project additional advertising revenue," Martin said. "By 2024, we expect Disney to be spending $500 million marketing its Disney+ services, of which 20% could go to Roku, representing $100 million of incremental ad revenue upside in 2024."
Martin maintained her buy ratings and $85 price target on the stock, which represents a 50% upside over the stock's previous closing price of $56.59.