Roku (ROKU) Stands Ground Against Potential Apple TV Competition; Analyst Weighs in on the Stock
Rumors are spreading that Apple is considering making a lower-priced connected TV dongle for its Internet TV platform to-be. Though it is unclear if and when this device will make it to the market, Macquarie’s analyst Paul Golding points out it could take some share away from Roku (ROKU) –but just for a moment. Golding presents his case for why he believes the stock will stay healthy in the long-term. Due to this, the analyst maintains his Outperform rating for the stock along with his $68 price target.
Golding has a host of reasons for believing Roku will stand its ground over time. Roku OS is preinstalled to more than 25% of new smart TV’s sold in America right now, which has significantly increased active users up 43%, bringing the number to 24 million in the third quarter despite what Golding considers toughening comps.
“This gets Roku into households before others in the CTV space, making an external player potentially redundant for some consumers. And Apple’s streaming service seems likely to be limited to Apple hardware according to The Verge, lowering the chance its app could make it onto a competitor’s OS and take ad-supported large-format viewership away from Roku,” Golding said.
Additionally, the 4K version of Apple TV currently sells for around $179 whereas Roku and the Amazon fire stick sell for around $40. The Roku is an easy pick for consumers because it is able to run on lower-end hardware. “Apple’s tvOS on a cheaper device with lower quality components may not deliver the same level of performance or functionality delivered by current AppleTV devices, and this may frustrate reviewers comparing Apple’s lower-end device with the rest of the more affordable CTV player segment,” Golding adds.
The analyst drives home another major point – Apple TV doesn’t offer network content like news and showcase films that are available for free on The Roku Channel. It’s hard to beat that. Roku has a deal where it exchanges ad revenue for content from networks and studios, which is driving up viewing hours on the Roku OS TVs and Roku players. In the third quarter, streaming hours were up by 63%.
All in all, Golding believes there’s no reason for Roku to feel threatened – and neither does the rest of the Street. Out of 9 analysts, TipRanks finds 7 are bullish and 2 are sidelined. The consensus price target of $66.44 shows an upside of nearly 77%. (See ROKU’s price targets and analyst ratings on TipRanks)