Fox agreed to pay $22 billion for Roku. That's enterprise value, which means it includes debt, which means the actual price tag is somehow both real and imaginary at the same time.
Roku makes streaming devices. Little boxes that plug into your TV so you can watch streaming services. On your TV. Which already streams things if you bought it after 2015.
Fox owns news and sports networks. They broadcast through cable. And streaming. And now they'll own the device that lets you watch their competitors. Vertical integration for people who never learned what vertical means.
The technical analysis here is bulletproof. Draw a line on a chart. Any line. Doesn't matter. This acquisition changes nothing about where that line goes next. Fox could've bought a hot dog cart for $22 billion and the chart would look identical.
Retail traders will now spend six hours researching whether this makes Fox a "streaming play" or a "hardware play" or a "synergy play." They'll create a DCF model in Excel. They'll discount future cash flows at 8.5% because that's what a YouTube video told them Warren Buffett uses. They'll arrive at a price target of $47. They'll buy at $52.
Roku's stock ran up 40% before the announcement because someone's cousin works in M&A and has a big mouth. Fox's stock did nothing because Fox has been doing nothing since 2019. The merger will close in nine months. Both stocks will trade sideways until then. Then they'll trade sideways after.
None of this matters. Read the chart. A streaming company buying a streaming device maker is not a catalyst. It's a press release. The 50-day moving average doesn't care that Fox overpaid for a universal remote with an app store.
Photo by on Unsplash
Leave a Comment