Roku (ROKU) is a leader in the smart TV market. There are 24 million active Roku users actively using its plug-in devices or a smart TV using its operating system. Furthermore, the company continues to report strong revenue growth, which grew 39% in the most recent quarter. Finally, Roku sees increasing revenue per user, which is important as the number of users continues to rise double digits. Top analyst Laura Martin of Needham sees these reasons (and others) as why Roku stock is an attractive pick. The analyst maintains her Buy rating and $45 price target, which implies nearly 50% upside from today’s closing price.
Is it worth listening to this analyst? According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Laura Martin has a yearly average return of 16.5% and a 59% success rate. While Martin is ranked #85 out of 5,075 analysts.
Martin calls Roku her “top pick” for 2019. She cites Roku’s long reach (24 million households), strong growth in users (43% y/y) and the amount of time the average user spends on the platform (3 hours per day per household). Martin says “Roku is the dominant platform for aggregating, organizing and discovering free ad-driven content (mostly old films and TV episodes) to watch,” which is important as the analyst expects users to continue choosing free, ad-based entertainment in which Roku gets a share of revenue from.
On revenue sharing, Martin does not “worry about fee pressures because Roku’s revenue shares are lower than iOS, Android, xBox and Sony PlayStation, which each keep 30%, and YouTube and Amazon, which each keep 45%.” Roku keeps between 20-30% of transaction/advertising revenue.
Martin seems to be very excited about Roku’s international expansion potential. The analyst says, “Roku has been focused on the US. [Market research firm] Ovum projects 900MM pay TV subscribers globally, of which less than 100MM are in the US, suggesting that Roku’s total addressable market is 9x larger than the US market.”
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 an 80% upside from where the stock is currently trading. (See Roku’s price targets and analyst ratings on TipRanks).