Key Takeaways
- Roku shares closed at $159, less than 1% below Fox’s $160 per-share offer, signaling the market expects the $22 billion deal to close.
- Q2 revenue rose 22% to $1.35 billion, and diluted EPS of $1.08 nearly doubled the $0.61 estimate.
- The Justice Department’s second request extends the antitrust review, with free ad-supported streaming the likely focus.
- Roku reports Q3 on November 2 with no call or outlook, so any DOJ update may matter more than the numbers.
Roku’s second quarter would normally move a stock. This time, the market barely noticed.
Roku (ROKU) closed Friday at $159, a hair below its 52-week high of $160. More importantly, it sits less than 1% under the $160 per-share price Fox (FOXA) agreed to pay in June.
The $22 billion deal pairs roughly $14.2 billion of cash with Fox Class A stock. Since the announcement, Roku has traded as a merger arbitrage, and the thin spread says investors expect regulators to let it through.
Washington slows the clock
On September 8, the Justice Department issued a second request to both companies. That extends the antitrust waiting period until 30 days after Fox and Roku substantially comply. Both still expect to close in the first half of 2027, subject to regulatory and shareholder approvals.
Fox President and COO John Nallen described the added scrutiny as “entirely expected” and said the deal remains on track.
The likely focus is free ad-supported streaming, where the deal would combine Tubi with The Roku Channel. Tubi reaches about 110 million monthly active users, and Roku reaches more than 100 million streaming households. Combined, Fox would become the second-largest U.S. distributor by viewership, behind YouTube, owned by Alphabet (GOOGL).
What happens to a stock once a buyer names its price?
Since June, the shares have hugged $160, and the second request caused only a brief dip.
Fox is buying an accelerating platform
Roku’s last full disclosure showed a business still gathering speed. Q2 revenue rose 22% to $1.35 billion, beating the roughly $1.30 billion consensus. Platform revenue grew 25% to $1.22 billion, led by $673 million in advertising.
Profit moved even faster. Net income reached $164.2 million, and diluted EPS of $1.08 nearly doubled the $0.61 estimate. Adjusted EBITDA jumped 225% to $254.3 million.
Engagement grew more slowly but steadily, with streaming hours up 7% to 37.9 billion. Management also rolled out a redesigned home screen, which the shareholder letter called “one of the most valuable pieces of real estate in TV.”
Platform now does nearly all the work.
Platform accounted for about 90% of Q2 revenue, and that high-margin mix is what Fox wants to pair with Tubi’s ad inventory.
TIKR tracks 27 analysts on Roku. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Roku, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Roku’s Analyst Ratings
Little upside, plenty of tail risk
At $159, Roku trades at 49.2x forward earnings and 26.6x forward EBITDA, with $2.08 billion in net cash. The average Street target of $162 sits almost exactly on the deal price.
The valuation already assumes a completed deal…
That multiple only holds if the merger closes. A DOJ challenge or tough remedies, such as limits on Fox promoting its own content on Roku, could send the shares back toward standalone levels.
There is other noise. Roku issued supplemental merger disclosures after receiving shareholder demand letters, and executives including CFO and COO Dan Jedda have sold shares in recent months.
My take: Roku’s business looks healthy, so a blocked deal probably would not send the stock back to its $79 low. Still, the math is lopsided for new money. You collect about 0.9% if the deal closes, but you risk a much larger drop if it breaks. I’d only own it here with a strong view on the DOJ.
Roku reports Q3 after the close on November 2, with no call or outlook. Consensus sits near $0.53 in EPS on $1.41 billion of revenue, but any update on DOJ compliance will matter more.
So what is Roku stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
