Insights

Why Tesla and Roku Are Sending the Nasdaq Skyward

Stocks remain on shaky ground, with investors watching Wall Street get in a good mood one day, only to lose its cool the next. Wednesday brought early losses for most market benchmarks, although a late-morning recovery cut those losses and actually helped the Nasdaq Composite (NASDAQINDEX: ^IXIC) move into positive territory as of noon ET.
A couple of stocks were instrumental in the Nasdaq’s move higher. Tesla (NASDAQ: TSLA) has been a focal point for investor attention for years, and the latest news from the electric-vehicle (EV) manufacturer inspired a more-positive vibe among shareholders. Meanwhile, shares of Roku (NASDAQ: ROKU) rose on rumors of a potential mega-merger in the streaming arena.
Tesla charges up
Shares of Tesla were up more than 3% on Wednesday near midday. The EV pioneer got some good news from a key supplier that could help Tesla continue to reach for ever-higher production goals.
An executive at Chinese automaker BYD (OTC: BYDDY) told state media sources that it is getting ready to supply EV batteries to Tesla. BYD, which has earned the seal of approval from billionaire investor Warren Buffett, saw its shares rise nearly 3% on the Hong Kong exchange following the news.
Tesla has sought to make its own batteries, but demand for its vehicles is so strong that it has also tapped third-party suppliers to help cover its internal shortfall. Adding BYD to its list would potentially help it keep its production numbers up, particularly at its Gigafactory in Shanghai.
Using a competitor as a component supplier obviously carries some risks for Tesla, especially given BYD’s high aspirations in its home market in China. Nevertheless, with the right terms, a deal between two rivals can be good for both, and that’s the conclusion Tesla shareholders seem to be drawing today.
Is RokuFlix coming soon to a TV near you?
Shares of Roku moved upward more sharply, jumping 12% at midday on Wednesday. The streaming television specialist is generating a ton of buzz right now because of talk among rank-and-file employees that a major acquisition might be in the works.
Multiple reports suggested that people inside Roku are talking about the possibility that Netflix (NASDAQ: NFLX) could make an acquisition bid for the connected-TV player. Roku would arguably make a reasonable target for Netflix, given that the latter has seen its growth slow recently. Tapping into an adjacent market and expanding its global reach would be solid strategic justifications for a bid.
However, much of Roku’s success has come from its ability to play one content provider against another. On numerous occasions, service providers have threatened to pull their content from Roku, only to arrange last-minute deals to ensure continued access.
Roku’s ability to negotiate from that position of strength arguably hinges on its status as an unrelated third party without ties to any one set of content. But if Netflix were to acquire Roku, it could cool the willingness of Netflix’s competitors to turn to Roku for distribution.
Both Netflix and Roku have seen their respective stocks plunge from their all-time highs in the past year. It’s too early to tell whether the response that Roku apparently made in temporarily halting internal transactions in its stock indicates that the rumors about a potential acquisition are true.
Moreover, even if the rumors transform into actual discussions between the two streaming companies about a possible combination, there’s no guarantee that Netflix and Roku will be able to find enough common ground to move forward with a merger.
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BYD, Netflix, Roku, and Tesla. The Motley Fool has a disclosure policy. –

Stocks remain on shaky ground, with investors watching Wall Street get in a good mood one day, only to lose its cool the next. Wednesday brought early losses for most market benchmarks, although a late-morning recovery cut those losses and actually helped the Nasdaq Composite (NASDAQINDEX: ^IXIC) move into positive territory as of noon ET.

A couple of stocks were instrumental in the Nasdaq‘s move higher. Tesla (NASDAQ: TSLA) has been a focal point for investor attention for years, and the latest news from the electric-vehicle (EV) manufacturer inspired a more-positive vibe among shareholders. Meanwhile, shares of Roku (NASDAQ: ROKU) rose on rumors of a potential mega-merger in the streaming arena.

Tesla charges up

Shares of Tesla were up more than 3% on Wednesday near midday. The EV pioneer got some good news from a key supplier that could help Tesla continue to reach for ever-higher production goals.

An executive at Chinese automaker BYD (OTC: BYDDY) told state media sources that it is getting ready to supply EV batteries to Tesla. BYD, which has earned the seal of approval from billionaire investor Warren Buffett, saw its shares rise nearly 3% on the Hong Kong exchange following the news.

Tesla has sought to make its own batteries, but demand for its vehicles is so strong that it has also tapped third-party suppliers to help cover its internal shortfall. Adding BYD to its list would potentially help it keep its production numbers up, particularly at its Gigafactory in Shanghai.

Using a competitor as a component supplier obviously carries some risks for Tesla, especially given BYD’s high aspirations in its home market in China. Nevertheless, with the right terms, a deal between two rivals can be good for both, and that’s the conclusion Tesla shareholders seem to be drawing today.

Is RokuFlix coming soon to a TV near you?

Shares of Roku moved upward more sharply, jumping 12% at midday on Wednesday. The streaming television specialist is generating a ton of buzz right now because of talk among rank-and-file employees that a major acquisition might be in the works.

Multiple reports suggested that people inside Roku are talking about the possibility that Netflix (NASDAQ: NFLX) could make an acquisition bid for the connected-TV player. Roku would arguably make a reasonable target for Netflix, given that the latter has seen its growth slow recently. Tapping into an adjacent market and expanding its global reach would be solid strategic justifications for a bid.

However, much of Roku’s success has come from its ability to play one content provider against another. On numerous occasions, service providers have threatened to pull their content from Roku, only to arrange last-minute deals to ensure continued access.

Roku’s ability to negotiate from that position of strength arguably hinges on its status as an unrelated third party without ties to any one set of content. But if Netflix were to acquire Roku, it could cool the willingness of Netflix’s competitors to turn to Roku for distribution.

Both Netflix and Roku have seen their respective stocks plunge from their all-time highs in the past year. It’s too early to tell whether the response that Roku apparently made in temporarily halting internal transactions in its stock indicates that the rumors about a potential acquisition are true.

Moreover, even if the rumors transform into actual discussions between the two streaming companies about a possible combination, there’s no guarantee that Netflix and Roku will be able to find enough common ground to move forward with a merger.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BYD, Netflix, Roku, and Tesla. The Motley Fool has a disclosure policy.

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