Needham’s Laura Martin raised her Roku (ticker: ROKU) price target to $400 from $315 in a note, maintaining a Buy rating.
“Investors often ask us to pick winners [versus] losers in the streaming space,” she wrote. “What’s clear to us from 2020 is that ROKU has won the streaming wars in the US.”
Roku sells devices that allow users to access streaming services, but most of its sales growth potential comes from cuts of advertising and subscriptions on its platform. The stock has soared 178.4% in the past 12 months. As new users flocked to the service, Roku also inked deals to add AT&T’s HBO Max and Comcast’s Peacock to its platform.
Martin wrote that the company’s connected television focus, platform competitive advantages, moats, and execution signal that Roku will gain market share in 2021. She also expects the economy to improve from the Covid-19 crisis this year, which could boost advertising spending on the platform—and help Roku better monetize its user base.
Her note came after Roku said Wednesday that its platform ended 2020 with 51.2 million active accounts, up from 46 million at the end of the third quarter. Amid the Covid-19 pandemic, users turned to streaming services and invested in at-home entertainment. Roku was among several tech firms that benefited, adding 14 million active accounts in 2020.
“I’m excited that more than 50 million households now turn to Roku for their TV viewing,” CEO Anthony Wood said in a news release. “The world is moving to streaming and we look forward to continuing to help viewers, advertisers, content publishers, and TV manufacturers succeed in the Streaming Decade.”
Martin isn’t the only one who views the stock positively: Citi Research analyst Jason Bazinet wrote in a Wednesday note that the active account figure topped consensus expectations. He has a $375 price target and a Buy rating.
“Roku’s continued growth seems to be have been insulated from competitors in 2020,” he wrote. “We see this continuing into 2021 as cord cutting continues. By the end of 2020, nearly 1/3rd of U.S. households have cut their traditional pay-TV service according to Roku’s 2020 study. We look to the 4Q20 earnings release for more details.”
Roku stock was up 8.6% to $372.49 Thursday afternoon, while the
index was up 1.4%.
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