Roku (NASDAQ:ROKU) has received a highly positive endorsement. Famed investor Cathie Wood thinks that the streaming technology company has tremendous potential. In fact, she recently stated that she thinks it can reach the per-share price of $605 by 2026. Give the current ROKU stock price of $88.43, that is a highly bullish target. But it would fit well with Wood’s trend of picking stocks previously beaten down by broad market forces.
What’s Happening With ROKU Stock
ROKU stock began today by shooting up 2.4%. While it would soon fall and display some volatility throughout morning trading, shares began rising again by 11:00 a.m. Eastern. Since then, ROKU has been advancing steadily upward. As of this writing, it is up 3% for the day and looks primed to continue its upward trajectory.
Despite rising more than 20% in the last month, ROKU has still shed 50% of its value since 2022 began. Investors know that the ARK Invest CEO favors tech stocks that Wall Street has cast aside. But why does she see ROKU stock as having such significant potential? Let’s take a closer look.
ARK’s Bullish Thesis
If Wood’s ROKU stock price target is correct, it will mean an increase of roughly 7x for investors, generating an annual growth rate of 53%. As Seeking Alpha reports, “Looking at ARK Invest’s bull and bear cases, it sees ROKU reaching as high as $1,493 per share and as low as $100 per share, which would provide annualized returns of 88% and 3%, respectively.”
In the report, Wood’s team at ARK breaks down Roku’s two revenue streams: player and platform revenue. It sees the second as being divided into several key parts, including third- and first-party video advertising as well as The Roku Channel, content distribution, and display advertising.
As the report notes, “Roku’s first-party data in ad campaigns, as processed through OneView, has the potential to lead to better returns on investment (ROI), thanks to the more efficient targeting, conversion, and monetization of ad viewers.” The model also regards “all content distribution as monetizable relationships for Roku.” Wood’s team details, though, that the model includes neither Roku Pay nor direct commerce as potential revenue drivers.
This isn’t the first bullish call Wood has made on a beaten down tech stock. In June 2022, ARK published a bull thesis for Zoom (NYSE:ZM), citing the stock’s potential if hybrid work models continue to grow. Some of her other large holdings include Tesla (NASDAQ:TSLA), Block (NYSE:SQ) and Coinbase (NASDAQ:COIN), three tech plays that have all suffered significant losses in 2022.
What It Means
It is not at all unexpected that Wood would be bullish on ROKU stock. The company fits perfectly within her wheelhouse of struggling tech plays with plenty of room for growth. “Roku stock is at its most attractive valuation in years,” states InvestorPlace contributor Dana Blankenhorn. “If you can handle the risk, the potential reward is there. It remains a good speculation for a young investor.”
On top of the valuation, this year has seen considerable speculation that Netflix (NASDAQ:NFLX) is considering a Roku buyout. This speculation has pushed ROKU stock up in the past. But even if Netflix makes no such offer, Wood’s case for Roku is worth considering. The stock certainly has the potential to turn around and keep rising. What is unclear is it will hit Wood’s aggressive target.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
