Roku is well-positioned to benefit from the video streaming trend…
Roku stock was up 5.8% to $99.06 in trading Wednesday after Guggenheim increased Roku’s rating from neutral to buy and increased the company’s price target. Analyst Michael Morris said he believes the company’s stock could rise as much as 28% over the next year.
The company continues to benefit from the popularity of streaming services as well as increased digital ad spending. Roku’s shares rose more than 4% on Wednesday morning and the stock is up 50% over the past month alone.
Could Roku’s stock rise even higher?
In some ways, it’s surprising the Morris gave Roku a buy rating when its valuation is already so high. Could the company’s shares still rise higher in the coming year? According to some analysts, yes.
When it comes to the video streaming market, Roku has a unique advantage. Over the next few years, a number of new streaming services will be introduced to the market. This is good news for Roku because it will have the opportunity to partner with many of these companies.
For instance, Roku will be one of the distribution partners for Apple TV when it launches. As more services come to market, Roku should be able to benefit from distribution agreements with many of these companies.
And this is not counting the revenue Roku earns from selling advertising on its platform. Currently, Roku has more than 4,000 ad-supported channels and it also earns a percentage of revenue from third-party services sold on its platform. And the company’s streaming hours continue to increase year over year.
Conclusion
Finally, one of the biggest advantages Roku has is its growing and engaged customer base. As of the end of March, Roku had over 29 million active accounts which is a 40% increase year over year.
And half of Roku’s users also own Roku TVs, which makes it much harder for these customers to easily switch to one of the company’s competitors. Roku TVs accounted for one-third of all smart TVs sold in 2018.
The company’s stock is up 225% from the beginning of 2019, making it one of the best-performing stocks of the year. And all signs seem to point to much higher growth in the years to come.
