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How Analysts View Roku Stock

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Jun. 24 2019, Updated 1:59 p.m. ET

Roku stock is trading above analysts’ target

Of the 17 analysts covering Roku (ROKU) stock, eight recommend “buy,” seven recommend “hold,” and two recommend “sell.” Their average 12-month target price of $78 implies a 24.0% downside from its current price. Their highest target price is $120.

Analysts’ conservative estimates are understandable considering given Roku’s bull run this year. It faces competition from tech giants Apple and Amazon, which have billions in cash reserves that can be used for marketing and sales.

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Strong user metrics

While Roku stock could be volatile in the short term, it looks like a solid long-term pick. Roku’s domestic growth has been strong and the stock could gain significantly if the company can penetrate international markets.

Roku’s robust revenue growth implies it has benefited from cord cutting. As the video streaming market evolves, Roku expects its subscription- and ad-supported business models to boost its sales growth.

The Roku Channel has over 10,000 free ad-supported movies and TV episodes, and its licensing deal could continue to attract users. Roku’s platform engagement has also grown over the years, and Roku reports that the average active account consumes 3.5 hours of online content per day.

Streaming hours have risen 74.0% to 8.9 billion from 5.1 billion for Roku. The higher user engagement also boosted its average revenue per user year-over-year in the first quarter from $15.07 to $19.06. Roku, valued at $11.6 billion, could be an attractive acquisition target given its strong growth metrics.

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