Roku Inc (ROKU) stock nearly quadrupled in value between November of last year and the beginning of October. However, like many of peers in tech, the stock found itself in a downtrend, losing nearly 22% of its value since the beginning of the month.
In an effort to take advantage of the recent correction in ROKU, RBC Capital’s top analyst Mark Mahaney decided this afternoon to upgrade the stock from Sector Perform to Outperform, while boosting the price target to $70 (from $48), which implies an upside of 23% from current levels. Apparently, Mahaney believes the stock has sold off enough to make it a buy.
Another factor driving for this upgrade: “Near-term, we see ROKU as one of the three SC Net Stocks with the least fundamentals risk – i.e. best opportunity for upwards estimates revisions. Long-term, we view ROKU as one of the best plays on ad-supported OTT,” Mahaney explained
ROKU is prone to big moves after reporting earnings on November 14. To help you prepare, here is what Mahaney is expecting: “We are modeling Q3:18 Revenue of $172MM, which is at the high- end of management’s guidance of $164 -$172MM and above the Street at $170MM. Our Adjusted EBITDA loss projection of ($4.5MM) is slightly higher than the Street at ($4.1MM) and at the lower-end of company guidance of ($8) – ($3)MM. Based on intra-quarter data points and our model sensitivity work, we believe Street estimates for the September quarter are reasonable, with more upside than downside likely. We expect ROKU to at least reaffirm its 2018 Revenue guidance of $710-$730MM and its Adjusted EBITDA guidance of $11-$23MM. We view current Street Q4 estimates as at least bracketable (Street modeling 52% Q/Q Revenue growth and $17MM in Adjusted EBITDA).”
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Mark Mahaney has a yearly average return of 24.5% and a 68% success rate. Mahaney is ranked #29 out of 4893 analysts.
Net-net, the streaming giant certainly has the Street divided. Based on 8 analysts polled by TipRanks in the last 3 months, 4 rate a Buy on ROKU stock, while 4 maintain a Hold. The 12-month average price target stands at $67.13, marking a nearly 18% upside from current levels. (See ROKU’s price targets and analyst ratings on TipRanks)