On Monday the price of Roku (NASDAQ:ROKU) stock jumped by nearly 7% after reports that the streaming platform has agreed to an extension of its multi-year distribution agreement with Amazon (NASDAQ:AMZN).
While the terms of the agreement have yet to be disclosed, the extension means customers can continue to access the Amazon Prime Video app and IMDB TV content on Roku.
“Roku and Amazon have reached a multi-year extension for their distribution agreement,” Roku said in a statement. “Customers can continue to access the Prime Video and IMDb TV apps on their Roku devices.”
Roku shares have gained nearly $8.32 so far, or around 6.6%, to $133.88 a share. Its shares are now down less than $100 from the $233.19 per share it closed at on Jan. 3.
The extension deal was reached at a time when global consumption for streaming video is projected to hit $82.431 billion in 2022. The annual growth rate of the streaming industry’s revenue is estimated at 8.9% and is expected to bolster the projected market volume to $115.9 billion by 2026.
According to Statista data, $36.517 billion of the projected revenue from the streaming industry will be realized in the United States in 2022. That suggests that despite the surge in streaming revenue, the U.S remains its largest market.
Therefore, this deal extension and the demand for streaming services could help boost Roku’s total revenue from the current $2.765 billion filed in 2021. This explains why Tik Tok’s revenue rose by 70% to $58 billion in 2021 and social media giants like Facebook (NASDAQ:FB) recorded a decline in users for the first time in 2021.
The company has been on a positive trajectory since 2018, going by its revenue of $742.506 million; $1.129 billion in 2019; $1.778 billion in 2020; and $2.765 billion in 2021.
However, Roku’s stock value declined along with other technology stocks ahead of the Federal Reserve rates increase. For the year to date, Roku has shed about 41% of its total value. Still, I will expect its new agreement and demand for streaming services to continue to support the company’s growth.
On the date of publication, Samed Olukoya did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.