The 2021 landscape has proven to be a difficult environment for companies that boomed during the height of the Covid-driven stay-at-home mandates. Amazon and Netflix readily come to mind, as both have lost momentum in 2021 and recent quarterly results disappointed investors.
So far in 2021, another of last year’s big winners is bucking this trend. Despite slipping recently, Roku (ROKU) shares are still up ~26% since the turn of the year.
Heading into Wednesday’s Q2 earnings (Aug 4 AMC), Wedbush’ Michael Pachter expects Roku to deliver a strong set of results yet again. His estimates coming above consensus and right at the high-end of Roku’s guidance.
Pachter highlights Roku’s outstanding job of growing its user base throughout the lockdown period. But the company has also used the opportunity to beef up its offerings on the Roku Channel (TRC), launching re-branded Quibi content while adding 20+ free, live TV channels in the quarter, amongst other initiatives.
But luckily for Roku it has another tailwind pushing it ahead. Advertisers are shifting budgets from linear TV over to streaming services as more and more consumers engage in what is known as ‘cord cutting.’ This is a trend still in a relatively early stage, and as advertisers will continue this “migration,” Roku stands to benefit as it has a “dominant market share, a rapidly growing user base, and superior targeting capabilities.”
It’s a trend that has been borne out by the results of several ad-focused companies during this earnings season. “Advertisers are spending more,” says Pachter, “Particularly for outlets that have superior targeting capabilities and an engaged audience.”
So, while the analyst thinks much of the advertising upside is already “priced in” and anticipates Roku shares will likely “remain volatile as expectations are perpetually high against a rich valuation,” Pachter has some simple advice for investors.
“We remain positive into the print and continue to view Roku as a long-term growth story with plenty of runway ahead,” the analyst wrapped up.
To this end, Pachter reiterated an Outperform (i.e. Buy) rating for the shares along with a $475 price target, implying one-year upside of ~14%. (To watch Pachter’s track record, click here)
Looking at the consensus breakdown, most agree with the Wedbush view. Based on 14 Buys, 2 Holds and 1 Sell, the stock boasts a Strong Buy consensus rating. Going by the $466.71 average price target, shares have room for a 9% uptick over the next 12 months. (See ROKU stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
