Send me real-time posts from this site at my email
Motley Fool

Roku Stock Will Surge 20% to $315, According to This Analyst

Shares of Roku (NASDAQ: ROKU) have already climbed 97% so far in 2020 but will surge to new all-time highs in the coming year.

That's according to Needham analyst Laura Martin. On Monday, Martin raised her price target on Roku's stock from $255 to $315 -- the highest among her Wall Street colleagues. Her new target represents potential gains for investors of roughly 20% over the stock's closing price on Friday of about $263.

Image source: Getty Images.

Martin cited several catalysts that she expects will drive Roku's stock higher in the coming year. The acceleration of cord-cutting during the pandemic will likely drive more business to Roku's platform. The company also benefits from the growing adoption of connected TV. Martin pointed to roughly 43 million streaming-only homes in the U.S. and the increasing number of streaming devices in each household as catalysts for Roku's advertising business.

The analyst also noted the company's unique position in the streaming industry as a key driver. "Roku generates revenue from both AVOD [advertising-based video on demand] and SVOD [subscription video on demand]," Martin wrote. That "implies it is hedged regardless of which companies win the streaming wars."

Will Roku's stock price hit $315?

The evidence suggests that Martin is right on the money. In the third quarter, Roku reported revenue that grew 73% year over year, driven primarily by platform revenue that surged 78%. This segment is comprised of advertising, the Roku Channel, and licensing of the Roku operating system (OS) for smart TVs.

At the same time, Roku's active accounts climbed to 46 million, an increase of 43%, while the average revenue per user climbed 20%.

Given the impressive growth in these metrics, the potential for Roku shares to grow significantly from here is not only possible but likely. An increase of 20% over the coming year might end up being conservative.

10 stocks we like better than Roku
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Roku wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of November 20, 2020

Danny Vena owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.


Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue