Needham’s Laura Martin maintains a Buy rating on Roku with a price target lifted from $65 to $85. The analyst also named Roku a “Top Pick” for 2019.
Tigress Financial Partners’ Ivan Feinseth.
Needham: ‘Overdone’ Reaction
Roku’s 14-percent loss Wednesday is “overdone” and several points should be included in the ongoing debate, Martin wrote in a research report.
Roku is a pure-play on over-the-top streaming video industry and should be valued similarly to Netflix, Inc. NFLX 0.24%‘s stock, which trades at 10 times fiscal 2019 EV/revenue. Assuming an in-line multiple, Roku’s stock should be valued at $80 per share.
Meanwhile, Martin said investor concerns with Apple Inc. AAPL 0.81%‘s upcoming media related presentation and the potential implications on Roku is likely overblown. First-hand channel checks confirm Apple is looking to sign up premium video channels on top of the $1 billion it has spent on its own content. This implies Apple’s announcement will be a “positive for Roku, not a negative” as the company likely wants its platform to be available to all customers not just its own iOS users.
Looking forward to 2020, the analyst sees upside to Roku’s stock for four reasons:
- Expectations for new up-front ad revenue for the September 2019-June 2020 TV season;
- Roku will solidify its status as a “dominant OTT aggregator” as new streaming platforms enter the market;
- The addition of SVOD options to the Roku Channel implies a larger revenue share than previously expected; and
- International expansion will address a larger total addressable market and drive revenue growth higher in 2020.
Tigress: Too Much Competition
Roku faces increasing competition, which Feinseth said now includes traditional cable services that offer access to streaming services and cloud-based expanded DVR capabilities at lower price points. The competitive environment will only intensify in the near-term from content publishers as well as smart feature-enabled TVs with rival Roku hardware.
“I continue to recommend avoiding the stock and believe significant downside risk exists,” the analyst wrote in his daily newsletter.
Shares of Roku were trading higher by 2.4 percent at $62.16 Thursday morning.
Roku Inc. shares were trading at $61.19 per share on Thursday morning, up $0.45 (+0.74%). Year-to-date, ROKU has gained 99.71%, versus a 12.55% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Benzinga.