Roku Stock: Next Stop, $600?

We’re spending a lot time streaming entertainment on our television these days, and for a lot of us Roku (NASDAQ:ROKU) has become the gateway to sticky engagement. The streaming video pioneer posted another blowout financial performance after Thursday’s market close, and at least one analyst feels that the ceiling is now higher for the stock’s trajectory.

Daniel Kurnos at Benchmark is boosting his price target on Roku from $410 to what is now a Street-high of $600. He was bullish before. He’s naturally sticking to his buy rating on the shares now. Despite Roku’s somewhat cautious guidance on how 2021 will play out, Kurnos feels that Roku’s strong momentum and its tendency to offer up conservative outlooks will keep making the stock a winning investment. His new price target translates to 32% of upside from Thursday’s close.

A woman channel surfing as she grabs into a bowl of popcorn.

Image source: Getty Images.

Roku like a hurricane

Roku closed out the year with 51.2 million active accounts, 5.2 million more than it had just three months ago and a 39% burst over the past year. The jaw-dropping metric is that platform revenue more than doubled that pace, up a scintillating 81%. We’re streaming more per Roku user. The 17 billion in hours spent on the platform in the fourth quarter is 55% higher than the time we spent cradling the Roku remote during the prior year’s holiday quarter. Roku is also getting better at monetizing its captive audience, with average revenue per user climbing 24% over the past year.

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Total revenue climbed a more modest 58% in the quarter, but this was the handiwork of slower-growing player revenue holding back overall results with its mere 18% advance. It’s a seasonal thing. Roku players are popular holiday gifts, and as a result we’ve seen total revenue accelerate between the fourth and first quarter every year since the company’s 2017 IPO. 

Roku’s own guidance was calling for top-line results to climb in the mid-40% range, and hungrier analysts were targeting a 49.6% increase. Roku’s 58% revenue burst naturally leaves all of those prognostications in the dust.

The good news doesn’t end on top line. The bottom line is even better.

“Analysts see a small loss for the quarter,” I wrote earlier this week, previewing Roku’s performance. “Roku surprised the market by posting a profit last time out, but it’s dangerous to bank on a repeat performance.”

Why, hello there repeat performance. Roku’s net income was positive for the fourth quarter, clocking in at $0.49 a share. 

Expectations were high going into Thursday’s earnings release. The stock more than doubled since its third-quarter report. It seems to have earned every one of those upticks. Roku has earned the right to be considered among the elite media stocks. It’s a tastemaker. It’s a leader in a booming market that’s growing even more popular even now when we’re no longer captive at home during the early stages of a pandemic. There’s no point in betting against Roku now. Momentum has the grabbed the remote, and it’s here to channel surf. 

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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