Roku (ROKU) Swims with Sharks: Is the Stock a Good Buy?


One way to look at Roku (ROKU) is as a big fish swimming in a little sea full of sharks.

The company has established itself as a leader in the smart TV market, as millions of people use Roku’s streaming device to transform their otherwise “dumb” TV into a smart TV, where they can stream movies and shows and watch live TV. But while there really are not too many companies doing what Roku does, its few competitors are not to be messed with. Combined, Roku’s main competitors – Apple (Apple TV), Google (Chromecast) and Amazon (Fire) – have a market cap of more than $2 trillion and are increasingly investing in home and TV products.

Yet, even as Roku faces rising competition from the world’s largest companies, Oppenheimer analyst Jason Helfstein is bullish on the company, reiterating an Outperform rating with price target of $61. (To watch Helfstin’s track record, click here)

Following meetings with Roku senior management, Helfstein remains “very bullish on The Roku Channel (TRC)” and says its “goal is to be the biggest aggregator of programming.” TRC – which was once only available using the Roku streaming device – is now available online, indicating that Roku is serious about becoming a content platform, while also expanding its reach to beyond customers using its hardware.

While Roku faces competition from the aforementioned “Big Three,” it also indirectly competes with TV-makers, including Samsung and LG. But Roku is working to mitigate this threat by pre-installing software into TVs, including those made by Philips, RCA, TLC and Sharp.

Wall Street sees the streaming device maker as a winning pick. TipRanks analytics show Roku as a Moderate Buy; based on 10 analysts polled in the last 3 months, 7 rate a Buy rating, while 3 maintain Hold. The 12-month average price target stands at $54.63, marking a 74% upside from where the stock is currently trading. (See Roku’s price targets and analyst ratings on TipRanks)

 

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