After a bumpy but relentless ride from $30 to $170 and then a retracement to $150-ish, a compelling argument could be made that Roku (NASDAQ:ROKU) has been the story of the year. After all, who could argue with a five-fold share-price increase in Roku stock?
Analysts debated and social-media gurus weighed in on Roku stock with every bump and dip, but the bulls walked away victorious; being “wrong” is of little import when your financial cup runneth over.
So here we are, then: can the ROKU stock price continue to defy logic and resistance zones, or is a pullback imminent?
A Longtime ROKU Stock Bull Doubles Down
Anyone can jump on the bandwagon after a stock goes on a tear, few have the prescience and the patience to actually practice the “buy low, sell high” market mantra. Laura Martin, an analyst from Needham, certainly mastered the “buy low” part of the equation as she’s been a hardcore Roku stock bull since the company’s 2017 IPO.
Whether Martin is a bona fide market seer or just a Lucky Laura is debatable, but I don’t mind giving her kudos for setting a $50 price target in 2017 – a time when few analysts took Roku seriously. Today, of course, Martin and stalwart ROKU stockholders are having the last laugh while onlookers bask in the afterglow and consider taking positions of their own.
If you’ll grant me a sidebar, I encourage you to read Citron’s “bubble” warning tweet from late 2017, which is laughable in hindsight:
“Time to pop some real bubbles. $ROKU, total joke. Citron trusts Mark Mahaney at $28 price target and that is IF they can hold comp back. Today’s Needham research is irresponsible. Unless $ROKU finds a way to stream a BTC- this stock is MUCH LOWER….caveat emptor”
Hindsight won’t be 20/20 in 2020, so now we as investors have to decide whether it makes sense to buy a stock that’s gone up 500% in less than a year.
My inner contrarian bristles at the thought, but the devil on my shoulder’s telling me to ride the streaming train all the way to the top. Who’s right? The cognitive dissonance is almost unbearable, but I’ll do my best to filter out the noise and give you some food for thought.
Analyze This
Not to bury the headline, but it’s quite the spectacle to see analysts get nasty like this. “Irresponsible” isn’t an oft-used word from one analyst to another, and it’s easy to conclude that the breathtaking run-up in the Roku stock price vindicated Laura Martin’s ambitious outlook.
I don’t think it’s that simple, though. Back then, there was no way to predict that Roku would become the streaming superstar it is today. More fundamentally, it was impossible to foresee streaming’s explosive growth, growth so powerful that its pace doesn’t seem sustainable at this point.
These analyst tussles can cause confusion among investors and, it seems, more than a modicum of capital loss. When Benjamin Swinburne of Morgan Stanley assigned Roku an underweight rating, shareholders shuddered and ROKU shares coughed up 15% of their value.
Swinburne also raised his price objective from $100 to $110, but evidently the rating downgrade overshadowed the price-target upgrade in the eyes of the investing community.
Not to be outdone (albeit in the opposite direction), Martin raised her price target for ROKU stock from the already lofty $150 to a monocle-popping $200; moreover, she hinted that Roku will prevail as the “winning aggregator of TV and films.”
That’s big talk, but Martin’s been right about Roku thus far – and as she’s quick to point out, Roku’s market footprint is sizable with an “installed base of 32 [million] US connected-TV homes.”
The Bottom Line on ROKU Stock
Call me a sideline sitter (or an abject coward – I’ll wear the glove if it fits), but I’m opting to stay out of the fray and come back to Roku another day. I’ll let the analysts fight amongst themselves and wage their price-target war if they must.
But I am willing to concede that shorting a shooting star mid-flight is foolish and ROKU stock’s trajectory is unmistakable: in the future as in the past, I’ve got a feelin’ it could break through the ceilin’.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
