During the pandemic, video and television streaming boomed. The influx of traffic to the existing platforms spurred what some have called the “streaming wars.” Companies are investing massive amounts of capital to expand their businesses and grow content slates. One of the largest video streaming players, Roku, Inc. (ROKU) has experienced a considerable selloff since its July highs, but analysts see it as an attractive entry point.
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Explaining his bullish calculus on the company is Ruplu Bhattacharya of Bank of America, who wrote that Roku is in a “unique position as a neutral player with a large installed base [which] should allow it to continue gaining marketshare as streaming services compete for subscribers.”
Bhattacharya rated the stock a Buy, and discerned a price target of $500 per share. This optimistic target reflects a possible 12-month upside of 55.43%.
The recent declines in share price indicate nothing more than an overreaction from investors, according to the analyst. The stock is down about 35% from its mid-summer highs, and Bhattacharya is unconcerned about serious competitive threats posing as real challenges for the firm.
Roku has been an attractive destination for advertisers’ brand managers and their cash, and has high levels of new advertisers joining year-over-year. The streaming hardware and software company still has market share to capture in international arenas, and it has healthy amounts of original content. Furthermore, its partnership with television manufacturer TCL has been productive, despite its connections with competing streaming platforms.
The analyst did concede that the economic reopening stirred some headwinds for Roku, but its viewership metrics have thus far stood strong. Additionally, Bhattacharya is not worried about Disney’s (DIS) decision to send the rest of its films this year to theaters first. He does not foresee a decrease in significance for the streaming industry.
On TipRanks, ROKU has an analyst rating consensus of Strong Buy, based on 14 Buy and 2 Hold ratings, and 1 Sell rating. The average Roku price target is $475, suggesting a potential 12-month upside of 47.66%. ROKU closed trading Wednesday at a price of $321.69 per share.
Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.
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