Roku (ROKU) stock jumped 25% yesterday on the back of the news that the streaming service increased active accounts by 40% to over 27 million in the fourth quarter. That’s great news for Roku investors who have gone through a bumpy ride since early last October.
Unsurprisingly, Keybanc analyst Evan Wingren remains bullish on ROKU with an Overweight rating and price target of $59, which implies over 40% upside from today’s closing price. (To watch Wingren’s track record, click here)
A day before the big announcement, Wingren told the firm’s clients: “Roku platform customers within our Key First Look database continue to track well, and likely imply active account upside relative to our expectations.” A nice call indeed. “In 4Q, indexed paying customers on the Roku platform within our Key First Look credit and debit card database (~10,000) grew ~64% y/y, as compared to ~52% y/y in 3Q, and ~59% y/y in 2Q. Although we believe there is likely some degree of higher purchasing rates by existing active accounts, we believe this acceleration implies that there is likely upside for active accounts to ~27M (~3M net adds q/q), driven by new customer acquisition; we believe active accounts in the quarter could be announced this week at CES, and would have implications for FY19 platform revenue. Intra-quarter, we also noted record search volume, which continued in December.”
In addition, the Roku Channel (TRC) is becoming a key driver of value. TRC was first launched in October 2017 and is already one of the top 5 most watched apps on Roku. To make it even more compelling, Roku recently announced its intention to include premium subscription content into the channel. Wingren believes this “provides an opportunity for monetization for the platform business, which has lower friction than signing up for those premium services directly. TRC could become a meaningful acquisition channel given its reach. Importantly, it provides additional consumer incentive to engage with TRC, which could, in turn, lead to more ad-supported content over time.”
Other analysts share a similar enthusiasm with Wingren when it comes to ROKU. TipRanks data shows out of 10 analysts, 7 are bullish and 3 are sidelined. With a consensus price target of $54.63, the potential upside is about 35%. (See ROKU’s price targets and analyst ratings on TipRanks)