Roku Stock Can Keep Climbing, This Analyst Says. It’s Not Because of Comcast Rumors.
Roku stock got a bit of a boost amid speculation that is could be a potential acquisition target for Comcast. While Wall Street doesn’t think much of that news, an analyst at Macquarie thinks Roku is still undervalued.
Macquarie analyst Tim Nollen raised his price target on Roku stock (ticker: ROKU) to $485 from $400 in a note on Thursday. That implies 13% upside from Thursday’s close. Roku stock has rallied 49% from its levels ahead of earnings on May 6, when shares of pandemic favorites like Roku were selling off.
Regarding the speculation, which was kicked after The Wall Street Journal reported an acquisition of Roku is among the options floated by Comcast CEO Brian Roberts, Nollen thinks Comcast would need to pay even more than his target.
“We believe Comcast investors would rather see the company divest its NBCUbusiness than make another expensive acquisition,” he wrote.
After jumping 4.5% on Wednesday following the report, Roku stock closed up another 0.5% to $423.58 on Thursday. The S&P 500 index was up 0.6%.
Nollen writes that Roku’s investment in original content seems to be paying off, with its Roku Channel growing twice as fast as other apps in reach and streaming hours. That will help advertising revenue in the broader platform division double in size this year, comprising about 75% of the segment’s revenue at $1.7 billion, he said.
The analyst added that is view on Roku “is based on the long runway we see ahead in both device and ad sales.”
He says the main risk for Roku is a possible slowdown in the second half of the year, given the tougher year-over-year comparisons for sales—something most pandemic darlings will face as the world reopens.
Write to Connor Smith at [email protected]
