Roku Stock Jumps as an Analyst Says It Could See Netflix-Like Growth
Roku stock jumped Wednesday after an analyst upgraded the streaming video company, suggesting Roku stands to grow its user base substantially over the next three years.
Roku stock (ticker: ROKU), up more than 250% in 2019 through Tuesday’s close—though down from early fall intraday highs above $170—was recently up 8.5% to $117.23 as the S&P 500 rose 0.87%. Macquarie Research analyst Tim Nollen on Wednesday upgraded the stock to Outperform from Neutral, boosting his price target by $20 to $130, $2 off FactSet’s average.
“We believe the shift to connected TV viewing that has been under way in the U.S. for the past few years will follow internationally in the coming years,” Nollen wrote. “Roku has built a leading position in the U.S., and we believe its devices will find a ready market abroad—but the bigger growth opportunity may be its smart TV operating system integrations.”
Roku sells streaming devices, but it also gets paid by TV makers that license its operating system and by reselling other companies’ content through its platform. Ultimately, more users mean more opportunities for Roku to get paid, and Nollen thinks it could reach 72 million users by 2022 from about 30 million at the end of the second quarter.
Read: An Analyst Said the Cost of Streaming Boxes Will Fall to Zero
Wall Street doesn’t have a user estimate for 2022, according to FactSet, but it projects 54 million by 2021. That would imply 33% growth between 2021 and 2022, with Wall Street looking for 29% this year.
Nollen and other analysts have noted that Roku has yet to fully detail the kind of aggressive overseas rollout plans that most analyst expect to drive growth in the next few years. ”We know little about the international rollout plans, or costs beyond this year, which we assume will rise as marketing demands emerge,” he wrote.
But the opportunity could be Netflix -like (NFLX), according to Nollen. (Wall Street expects that company to grow from about 81 million international streaming customers at the end of 2018 to 181 million by 2022.) “Roku’s growth trajectory internationally could well echo that of Netflix’s,” Nollen wrote.
At 72 million users in 2022, Nollen wrote, total revenue could reach $2.7 billion, ahead of the Street’s $2.6 million consensus estimate.
Email David Marino-Nachison at email@example.com. Follow him at @marinonachison and follow Barron’s Next at @barronsnext.