Analysts love Roku (NASDAQ:ROKU) stock and investors are quickly catching up to this hot tech play.
Since Aug. 25, Roku’s share price has jumped 20% to an all-time high of just almost $180 a share. The breakout occurred after two analysts issued bullish reports about the video streaming platform, noting increased demand as people shelter at home during the novel coronavirus pandemic and watch more videos.
ROKU stock has gained 34% year-to-date, and the latest breakout is likely to propel the share price even higher. Investors looking for a technology stock that is not yet played out should consider grabbing Roku shares before the trend even higher.
The Market Leader
Citibank recently initiated coverage of ROKU stock with a buy rating and a $180 price target. In its analysis, Citi cited growth of Roku’s active accounts as being a key driver of growth for the company moving forward.
That grabbed the attention of investors. However, the share price really popped after Deutsche Bank issued the results of a survey the investment firm conducted covering the connected-TV market that found Roku “remains the market leader in the U.S,” ahead of both Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL).
The Deutsche Bank survey of 1,048 American consumers found that Roku has a 43% share of Internet connected television sets, compared with 35% for Amazon Fire TV and 27% for Apple TV. Deutsche Bank slapped a “buy” rating on Roku stock with a price target of $185 a share, and investors piled on.
Another noteworthy finding from the survey was that Roku has the highest consumer satisfaction rate when it comes to quality, with 54% of respondents rating their Roku device as six or higher on a 10-point scale. This outpaced Amazon Fire TV, with 53% satisfaction rate, and Apple TV at 38%.
Plus, there is plenty of room left for Roku to grown considering that more than two-thirds of consumers have not yet purchased television that can connect directly to the Internet, eliminating the need for a secondary device to access streaming services such as Netflix (NASDAQ:NFLX). All of this bodes extremely well for Roku and its shareholders going forward.
While ROKU stock has enjoyed solid gains this year, it has been flying under the radar when compared to the share price appreciation of its competitors.
Record Streaming Hours
A few other reasons to be bullish on ROKU stock include the fact that the company had 43 million active accounts at the end of June, up 41% from the same period in 2019. Also, the average revenue per user has risen 18% to $24.92 since this time last year.
And, a record 14.6 billion hours were streamed through Roku Internet connected TVs in the second quarter of this year, representing a 65% annual increase in consumption. Analysts note that advertising revenue should begin to climb as the pandemic subsides and ad agencies take notice of the increase in people watching TV shows and movies through Roku’s Internet connected TV sets.
While Roku remains ahead of the pack right now, competition in the space is heating up and forecast to be fierce in coming years as Internet-connected TVs become the norm going forward and consumers adopt them in greater numbers. Additionally, Roku continues to face difficult negotiations to get new streaming services to use its platform.
While Netflix is on board, Roku is in the midst of negotiations with two of the newer streaming services, HBO Max and NBC’s Peacock. Getting a growing number of streaming services to be featured on its platform will be key to Roku’s future success.
For now, though, Roku is at the forefront of what is widely expected to be the future of TV.
The Verdict On ROKU Stock
Roku is a tech stock and stay-at-home play that is late to the party. Investors should seize on the fact that ROKU stock is now breaking out and experiencing the rapid growth in its share price that other companies have been enjoying since early April of this year.
Analysts remain enthusiastic about Roku and its potential. Citi and Deutsche Bank aren’t the only ones that are bullish on Roku. The 19 analysts who cover the company have a consensus “buy” rating on the stock, with many forecasting a share price north of $200 per share in the coming 12 months.
Investors looking for solid growth and long-term potential, and those who feel they may have missed out on other big tech stock breakouts in recent months, should buy shares of Roku. The company is leading in a market that could explode in coming years as Internet connected TV sets become standard and increasing numbers of streaming services turn to platforms such as Roku to reach their customers.
With the market catching up to Roku, now would be a good time for investors to jump on board ROKU stock.
On the date of publication, Joel Baglole held positions in ROKU and AAPL.
