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Why Roku Stock Jumped 5% Today

What happened

Shares of media-streaming technology expert Roku (NASDAQ: ROKU) traded 5% higher as of 1 p.m., EDT. A household name in consumer electronics is getting back to the American TV market after a six-year hiatus. It has tapped Roku to provide the smart TV software platform for its upcoming living room products.

So what

Japanese electronics veteran Sharp exited the U.S. television market in 2015, selling its North American manufacturing plants and licensing its brand name to the Chinese sector peer Hisense. The following year, the Chinese electronics manufacturing giant Hon Hai Precision Industry (OTC: HNHPF) picked up the company in a $3.5 billion buyout.

Well, the reformed Sharp is getting back to making American TV sets. A Nikkei report says that Sharp will make LCD televisions with 50-inch to 75-inch liquid display screens, made in Hon Hai's Foxconn-branded Mexican plants with Roku's smart TV software installed. Hisense's use of the Sharp brand ended in 2019, following a heated courtroom battle where Sharp claimed that Hisense was damaging the brand.

Image source: Getty Images.

Now what

Even with Hon Hai/Foxconn's massive manufacturing might and distribution network behind it, Sharp faces an uphill battle to grab a significant share of the American TV market. Roku's software gives Sharp a finely tuned, consumer-friendly platform with access to every media-streaming service worth its salt, but that's not a competitive advantage because you can already get a Roku-powered TV from more than a dozen brands.

That being said, Sharp used to be a true heavyweight, and Foxconn does bring a potentially game-changing infrastructure advantage to the table. Roku can stick another good-looking feather in its colorful hat of consumer-facing partners. Building partnerships is what it's all about, and this particular addition could easily be worth a 5% higher share price in the long run.

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Anders Bylund owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.


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