What’s going on with Roku stock?
Roku stock popped on Tuesday. Shares of the streaming company rose by 8.2%, following encouraging analyst comments.
Why we care
Barton Crockett, an analyst at Rosenblatt Securities, has a buy rating on Roku’s (NASDAQ:ROKU) stock. He thinks that the digital media platform’s share price will rise to $188. If he is correct, shareholders could make gains of about 60% from the stock’s current level of around $117.
According to Crockett, Roku’s stock price dropped violently after reaching a 52-week high of $490.76 in late July. According to Crockett, the market’s “wicked turn” against premium-priced growth stocks corresponded with this. Roku’s fourth-quarter revenue shortfall and tepid sales forecast for 2022 didn’t help matters either.
However, Crockett believes that based on the stock’s decline, he thinks it’s presenting them with an attractive buying opportunity. He said Roku is well-positioned as a “gatekeeper” in the global shift from traditional television platforms to streaming options. As a result, he expects revenue to rise over the next year steadily.
At its most basic level, Roku is an advertising platform. However, as the television business moves away from broadcast and toward streaming, Roku provides both an ecosystem and a user base to assist marketers in reaching their intended audiences. Such a platform will be in high demand as Mordor Intelligence predicts an industry CAGR of 14% between now and 2026.
Roku is, in fact, well-positioned to profit from the shift of ad dollars to streaming platforms. Roku has over 60 million active account holders and over 20 billion streaming hours in the fourth quarter, making it a valuable marketing partner for advertisers.
Roku’s revenue has grown faster than inflation, so this stock will not stop. In 2021, the firm sold $2.8 billion worth of products, up 56% from the previous year. In addition, the company became profitable in 2021 with a net income of $242 million. So even though Roku projects first-quarter revenue growth to slow to 25%, it still outpaces inflationary pressure.
On the other hand, Roku is battling against well-heeled rivals like Amazon.com (NASDAQ:AMZN), which launched new smart TVs in September. Roku’s ability to compete with Amazon and other streaming giants will go a long way toward determining whether its stock can reach Crockett’s high price target.