Roku Inc (ROKU) 3Q Earnings Give This Top Analyst a Bit More Confidence

Mark Mahaney believes the company is executing on its long-term vision, but remains sidelined.


It’s a great day to be a Roku Inc (NASDAQ:ROKU) investor after the newly-public company’s stock soared about 45% on back of strong third-quarter earnings with outlook above Street’s estimates.

Specifically, the streaming device maker reported revenues of nearly $125 million compared to estimates of about $111 million and a loss of earnings per share of $0.10 compared to the estimated loss of $1.39. Roku’s guidance for the fourth-quarter is now $175 million to $190 million in revenue, well above the $177 million expected by the Street.

In reaction, RBC Capital analyst Mark Mahaney lifted his price target to $28 (from $26), while reiterating a Sector Perform rating on the stock.

Mahaney commented, “Roku appears to have extended its leadership position in Q3, growing Active Accounts an impressive 48%, with nearly 50% of new additions coming from Roku Smart TV’s. Roku is attacking a very large $70B TV Ad spend, and as this spend migrates to over the top, we believe Roku can sustain robust growth in both Active Accounts and Total Hours Streamed while improving monetization to drive material ARPU growth – key to Roku’s story. Our $28 price target is based on a 4x P/S on our ’19 Revenue estimate of $891MM. We believe our estimates for a 34% 3-year revenue CAGR and 47% 3-year Gross Profit support this multiple.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Mahaney has a yearly average return of 22.3% and a 72% success rate. Mahaney has a average return when recommending ROKU, and is ranked #29 out of 4707 analysts.

Wall Street is not convinced just yet on this streaming media firm, as TipRanks analytics demonstrate ROKU as a Hold. Based on 3 analysts polled in the last 12 months, all 3 maintained a Hold rating. The 12-month average price target stands at $26, marking a slight downside from where the stock is currently trading.