Roku stock spikes on rumors of Netflix buyout

Yahoo Finance Live anchors discuss the rise in stock for Roku amid speculation of a Netflix acquisition.

Video Transcript

BRIAN SOZZI: We're watching, right, shares of Roku spiking on speculation it could see an acquisition from none other than streaming giant, Netflix. Business Insider reported internal speculation among Roku employees about a Netflix deal, followed by a halt on employee training of vested stock options. A trading halt, we should note, could be for any number of reasons. We did reach out to Roku for comment. They did not return our request for comment immediately. But it's likely before our business hours. They are on the West Coast.

Interesting. Let's push back on this because you have Roku shares down about 93% over the past year. Having talked to Anthony Wood before-- that is the Roku founder and CEO-- I can't see him selling Roku, knowing that his stock is down 93% over the past year. Secondarily, he is familiar with Netflix. Keep in mind, Wood launched internet TV at Netflix. And it was that business, I believe it was in 2007, that ultimately got spun off into Roku.

So, of course, he's familiar with Netflix. They worked together. But still, I just can't see this happening right now. Netflix has given no indication it would have interest in this company.

BRAD SMITH: But this is exactly what we've been talking about, too. Some of the kind of depressed valuations for shareholders and the moves lower in stock prices creating an avenue or creating an environment for perhaps some dealmaking to take place strategically. I'm surprised that years ago, Apple didn't go after Roku when they were a $5 billion company. And then even with a premium, they could have been a $7 and 1/2 billion acquisition. Sure, it would have been the largest that Apple had ever made. But it would have been strategic and ahead of the pandemic.

So now, if you look at the strategy from Netflix, it's, how do we ensure that not only do we own our experience inside of the Roku hub, but how do we also ensure that we are the-- we own the hub that everybody else has to connect into through some of the other streaming partnerships that Roku already has?

JULIE HYMAN: Well, I mean, Reed Hastings has expressed disinterest in owning any kind of hardware in the past, right? Not super recently, but still. And I agree with you, Sozz, that if you read this story through, they cite chatter in the company. Like, that's, like, us saying what we think is going to happen with Yahoo Finance, and then it being reported as something that will actually happen. You know, we can say whatever we want! And then they also say some unnamed investment bankers who think maybe-- they get money when these deals happen.

BRIAN SOZZI: Of course. Well, look--

JULIE HYMAN: So, I mean, maybe there's something there. But this actual report doesn't indicate anything real is there. And that's also reflected, by the way, in the action this morning, because whereas the shares earlier were up as much as, what, 8%, 9%, now they're only up around 4%. So, clearly, there's a little more close reading now of that.

BRIAN SOZZI: Also, too, you have Netflix in cost cutting mode really after two bad quarters. And by the same extension, Roku has been in the mode of adding a lot of employees over the past year and a half. So if you're Netflix, why are you going to go out and buy a Roku and add even more expenses onto your already high expense base at a time when Roku's growth, top, bottom line, and subscribers, and average watch time, have been falling off the cliff the past few quarters? It doesn't make sense.

BRAD SMITH: It doesn't at all. I mean, and Roku, the thing that they have done well is be able to just live inside of other hardware and not necessarily have to manufacture all of it themselves.