Consumer Electronics

Will Roku Still Look Better Than Netflix After Its Q3 Report?

Chris Lange

Roku Inc. (NASDAQ: ROKU) is scheduled to release its third-quarter results after the markets close on Wednesday. The consensus forecast is a net loss of $0.28 per share and $256.36 million in revenue. In the same period of last year, the over-the-top media services provider said it had a net loss of $0.09 per share and $173.38 million in revenue.

So far, Roku shares have absolutely exploded in 2019, and it seems that analysts can’t raise their price targets quick enough. However, one analyst got out in front of the pack by taking the most bullish stance on the street, and even going as far as to say that Roku is a better pick than Netflix Inc. (NASDAQ: NFLX).

Needham issued a Buy rating and raised its price target to $150 from $120, implying upside of roughly 20% from the prior closing price of $125.32.

The firm noted that while Netflix and Roku trade at roughly the same multiple when comparing 2020 estimates, Roku is the preferred choice.

Both of these companies are looking to benefit from increasing consumer migration to streaming services, but Roku is a platform that aggregates content and resells other services. What this means is that Roku doesn’t need to compete on content or on monthly fees.

According to the report, Roku “is an arms dealer.” Needham went on to say:

It is indifferent about which over-the-top services or business models win. Roku negotiates a 20-30% revenue share from every over-the-top service that wants access to its 30 million homes. At 3.5 hours a day per household of viewing in the second-quarter of 2019, it would be impossible … to launch a new over-the-top service without access to Roku’s 36% of connected TV homes.

Excluding Wednesday’s move, Roku had vastly outperformed the broad markets, with the stock up about 355% year to date. In the past 52 weeks, the stock was up about 141%.

A few other analysts weighed in on Roku ahead of the results:

  • Rosenblatt Securities rates it a Buy with a $159 price target.
  • Wedbush has a Hold rating with a $105 target price.
  • Merrill Lynch has a Buy rating with a $154 price target.
  • RBC has an Outperform rating and a $155 target price.
  • Macquarie’s Outperform rating comes with a $130 target.

Shares of Roku traded up over 2% at $143.18, in a 52-week range of $26.30 to $176.55. The consensus price target is $137.53.