Analysts Are Chasing Roku Even Higher

Roku Inc. (NASDAQ: ROKU) stock has been a big hit this year, more than tripling since January, although analysts seem to be behind the curve when calling for upside for this stock. After Wednesday’s earnings report, analysts were quick to lift their targets, but this raises a couple of questions. Namely, can Roku keep up the pace, or will the stock start to slow down and even drop?

Here 24/7 Wall St. has included some highlights from the earnings report, as well as what analysts are saying after the fact.

The streaming entertainment provider posted a net loss of $0.08 per share and $250.1 million in revenue, which compares with consensus estimates that called for a net loss of $0.22 per share and $224.2 million in revenue. The second quarter from last year had breakeven earnings and $156.81 million in revenue.

During the quarter, active accounts had a net addition of 1.4 million sequentially to a total of 30.5 million. Streaming hours increased 0.5 billion hours sequentially to 9.4 billion, streaming hours are up 72% year over year.

Average revenue per user of $21.06 over the trailing 12 months increased by $2.00 from the first quarter. Platform revenues increased 86% year over year to $167.7 million, and player revenues rose 24% to $82.4 million.

Looking ahead to the third quarter, the company expects to see a net loss in the range of $40 million to $34 million and total revenues are expected to be between $250 million and $255 million. Consensus estimates call for a net loss per share of $0.26 and $245.38 million in revenue for the quarter.

Wedbush remains muted on Roku with a Hold rating and a $105 price target. The boutique brokerage firm detailed in its report:

Roku clearly has tremendous opportunities for revenue growth, as cord cutting and the rise of OTT services will likely contribute to modest growth of Roku’s Player business, as it expands its licensing partnerships, and as it expands advertising revenue on The Roku Channel (“TRC”) as well as with advertising video on demand (“AVOD”) partners. We expect the company to reach profitability within the next five years, but R&D spending may remain elevated for several years as Roku competes for TV licensing contracts and funds its international expansion. Roku has substantial growth opportunities, but we think the multiple is already stretched.

Here’s what a few other analysts had to say about Roku:

  • CIBC reiterated an Outperform rating and raised its price target to $120 from $79.
  • Macquarie reiterated a Neutral rating and raised its price target to $110 from $66.
  • RBC reiterated a Sector Perform rating and raised its target price to $107 from $90.
  • Oppenheimer reiterated an Outperform rating and raised its target to $120 from $79.
  • D.A. Davidson reiterated a Buy rating and raised its price target to $135 from $110.
  • Rosenblatt Securities upgraded it to Buy from Neutral and raised its target to $134 from $77.
  • Loop Capital reiterated a Sell rating with an $80 price target.
  • Stephens raised its rating to Overweight from Equal Weight and its target to $120 from $84.

Shares of Roku traded up about 21% on Thursday, at $122.45 in a 52-week range of $26.30 to $123.45. The consensus price target is $85.20

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