According to the Zhitong Finance APP, Needham analysts state that Roku (ROKU.US) is the next potential acquisition target, possibly merging with competitors or larger entities. On Wednesday, the stock soared by 10%. Potential buyers for this television streaming company may include streaming giants like netflix (NFLX.US), connected TV ad buyers such as the trade desk, retailers like Target (TGT.US), and even technology giants like amazon (AMZN.US), microsoft (MSFT.US), and Alphabet, all of which have large language models (LLM) that require receiving billions of new data points daily.

In a report on December 4, Needham stated: "The six reasons for acquiring Roku include its installed base, unique data set, pricing power, shelf space, buying and building advantages, and the fact that it is now the only scalable CTV platform available for purchase."

They pointed out that Roku's average viewing time in the third quarter was 4.3 hours per household per day, providing the company with "top-tier" consumer demand/viewing and advertising spending data points. They also believe that as algorithms improve, the value of Roku's data will increase.

Needham added: "We believe one of Roku's most undervalued assets is its data, which has never been monetized alone." They also noted that Roku holds advantages in pricing power, transparency, and measurement options because only the company knows which ads were viewed in each program.

The trade desk, which has a partnership with Roku, recently revealed that it has been developing the connected TV operating system Ventura and expects to launch it to the public in the second half of next year.

Needham believes the trade desk is late to the game in the CTV OS arena, so he thinks Roku should act cautiously and not share data, but rather force them to make an acquisition at a high premium to obtain its unique and valuable ACR data.

"Roku is the only scalable alternative product available for purchase. Buyers only need to persuade Anthony Wood (the founder and CEO of Roku, who controls Roku's super voting shares) to sell, and then Roku will be theirs. In contrast, we believe that no one can persuade Samsung, LG, Comcast, Amazon, or Google to sell their operating systems or installed connected televisions. We expect that by 2025, when Republicans control the regulatory agencies in Washington D.C., Roku will be acquired at a high premium."

Year to date, ROKU has declined by 10%, while the S&P 500 index has increased by 27%.

On Tuesday, Guggenheim stated that the proposed hypothetical merger between the trade desk and Roku might align with each other's strengths and ambitions.