Roku Stock Gains as BofA Increases Target Price


Nov. 15 2019, Updated 1:39 p.m. ET

Roku (ROKU) stock has risen more than 5% today. The streaming platform’s stock has wiped out the loss it recorded on November 7 after the company’s fourth-quarter guidance fell below Wall Street’s estimate.

However, Roku stock has gained 32% in the last week and an impressive 56% since the start of October. It has gained 387% year-to-date and is trading 12% below its record high. What’s driving this rally?

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Bank of America raises Roku’s price target

Today, Bank of America (BAC) analyst Ziv Israel increased Roku’s target price from $150 to $160, according to The Fly. Israel thinks the company’s lower prices and new product offerings will drive growth in the holiday quarter.

Yesterday, Roku announced several Black Friday offers and discounts. The Roku SE streaming player will be available exclusively at Walmart (WMT) stores for Black Friday. The company stated it would offer a $20 discount for its Streaming Stick+ and a $30 discount for its Smart Soundbar.

Investors are bullish on streaming services

In the third quarter, Roku’s sales rose 50% YoY (year-over-year) to $260.9 million. Its platform sales grew 79% YoY to $179.3 million, while its player sales rose 11% YoY to $81.6 million. The company’s platform sales, which include ads, licensing, and subscriptions, are set to grow with the launch of new streaming services.

Online streaming services Apple TV+ and Disney+ were launched earlier this month, attracting millions of viewers. The services are available on the Roku platform, which could boost its fourth-quarter subscription sales.

Roku stock has soared on the back of cord-cutting and consumers shifting to online streaming. In the third quarter, Roku’s streaming hours rose YoY to 10.3 billion from 6.2 billion. The company added 1.7 million active accounts in the September quarter. It now has over 32.3 million active accounts with average revenue per user of $22.58, up YoY from $17.34.

Though Roku competes with Apple TV+, the Amazon Fire Stick, and Google’s Chromecast in the streaming market, it is still the top US player in terms of market share. Furthermore, its growth could rise exponentially once the company expands internationally.

Roku’s addressable market is huge and continues to expand. I recommended the stock back in October after it lost 35% in September. The stock remains a solid long-term bet and has the potential to be a massive wealth creator.


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