Roku Inc (NASDAQ: ROKU) has seen a remarkable gain in investor confidence in 2020. Evidently, the Roku stock price has surged over 162% in the past six months of trading. The companies stock hit all time highs late last week after they announced their deal with AT&T’s HBO Max. The strong momentum can also be attributed to bullish analysts price targets released this month. With such positive growth, this article will breakdown what you need to know about Roku’s stock forecast for 2021.
Table of contents
Analysts go bullish on Roku stock – especially large institutions
Firstly, across the board of 22 Wallstreet analysts the general consensus is an overwhelming buy rating. The average 12 month price target for Roku stock is currently sitting at $244.42 a share. Although a downside of 28%, the more recent ratings in December range between $375 and $410. This is an exciting switch in smart money consensus, which investors have used as fuel to inflate the stock higher. Furthermore, Roku hasn’t received a sell rating from large institutions in over 6 months. The following price targets are from the month of December 2020:
- 12/17/2020 Benchmark – analysts at Benchmark increased their 12 month price target from $300 to $410 a share. This suggests Benchmark analysts are confident the company has an upside of 20% from its current trading price.
- 12/17/2020 Bank of America – analysts boosted the 12 month price target from $360 to $380 a share. This is an upside of 11% over the next 12 months of trading.
- 12/9/2020 CitiGroup – boosted their 12 month price target by an impressive 66%. The price target was boosted from $220 to $375 a share. This is an upside of 10% from its current trading price.
The price targets from Benchmark and Bank of America came after the AT&T deal which will likely reach millions of new subscribers. Timing of the deal was key for Roku as the superhero sequel “Wonder Woman 1984” from AT&T’s Warner Bros is set to premiere on HBO Max on Christmas Day. With a transition from movie theatres to home streaming, this strategic deal is a text book move from Roku management.
Breakdown on Roku financial forecasts for 2021
The Q3 earnings released on the 5th of November, provided investors with some very positive revenue and gross profit growth. The total net revenue grew 73% year on year to $452 million for the quarter. It was also noted that platform revenue increased to $319 million and Gross profit was up 81%. The company did note in their outlook for Q4 that expenses are likely to grow due marketing and headcount costs. Interestingly Roku were quite conservative on their outlook for Q4 guidance, releasing the following statement below:
“We anticipate that the overall Q4 year-over-year revenue growth will likely be in the mid-40% range, similar to the growth rate in the last few holiday seasons, and we expect platform revenue to account for roughly two-thirds of total revenue. In line with our typical promotional approach to the holiday season, we plan to keep Q4 player gross margins close to breakeven, while we expect Q4 platform gross margins to be in the mid-50% to 60% range which is between the Q2 and Q3 levels.”Roku Q3 earnings statement on looking forward to Q4 predictions
With little to no concrete guidance we can look to what analysts are predicting for revenue guidance for 2021. According to Yahoo finance, the average revenue forecast amongst 24 analysts places an annual revenue of $1.73 Billion in 2020. The 2021 revenue forecast extends to $2.39 Billion, a 37% revenue growth YOY. These are positive figures for long standing investors holding Roku stock.
I am obliged to remind our viewers that this article is not financial advice but rather investment commentary from extensive research.
In conclusion, Roku stock has had a sublime second half of the year on Wallstreet. The returns on Roku stock have rewarded the longer term shareholders with COVID-19 driving revenues to new heights. From an analyst standpoint, it is clear majority favours Roku stock to outperform in 2021. Furthermore, the recent upgrades in December from the likes of Bank of America and Citigroup cement investor confidence. The financial forecasts look positive, however no real guidance was released by Roku in the Q3 statement. Whether this was a ploy from executive management to undersell and outperform or simply to cover the risk, its important Roku can stand and deliver to these forecasts.
Written by Tyger Fitzpatrick, Founder of Youth Investment Group.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.