Roku Stock: Here’s why Bank of America sees 50% upside

Roku stock (NASDAQ:ROKU) has been one of the more popular growth companies over the past few years. A Fintwit darling, Roku has returned well over 1,100% over the past five years and has been a steady grower despite having its fair share of critics. If you aren’t sure what Roku is, it is a centralized platform for streaming media content from various online services. It started with hardware with Roku boxes and Roku sticks, but now it can be integrated directly into the smart TV itself. Here, users can stream from any of their favourite apps including Netflix, AppleTV, Disney+, and Amazon’s Prime Video.

Streaming giants slow from 2020 growth levels

The streaming industry has taken a giant leap forward thanks to the COVID-19 pandemic. At-home quarantines resulted in a massive surge in streaming subscribers, something that was experienced by both Disney (NYSE:DIS) and Netflix (NASDAQ:NFLX) as well.

One of the most prevalent bearish arguments for the streaming industry is that the worst of the pandemic is behind us, so streaming activity will most likely dip back to normal levels. It is this sentiment that has led to Roku trading mostly sideways in 2021, as the stock is only up 1.2%. 

Bank of America set $500 price target on Roku Stock

Wallstreet analyst Ruplu Bhattacharya from The Bank of America recently reaffirmed the companies $500 price target on Roku stock. The analyst discussed the swift 35% sell-off of Roku Stock may have been overdone as the analyst still sees future catalysts positively impacting Roku. Bhattacharya noted that Roku’s strong relationship with TCL will continue to benefit the company despite increasing competition. Furthermore, the analyst reaffirmed Roku’s streaming numbers as on target in the Q2 earnings release. Bank of America’s $500 price target on Roku stock currently represents a 51.9% upside from the current trading price.

The Streaming Wars 

It seems like nearly every company has a streaming service these days, although it is primarily still a two-horse race. But the beauty of Roku is that it isn’t necessarily in direct competition with Netflix or Disney. Roku’s platform works alongside the two streaming giants, rather than against them, unless of course you consider Roku Originals to be the company’s next strategic step.

Yes, little known to most consumers, Roku has now started to stream its own original content following in the steps of Netflix and Prime Video. The Roku Originals aren’t exactly mainstream yet, but every platform has to start somewhere. Roku also doesn’t exactly have the same budget as Netflix, Disney, or Amazon have. Still, Roku’s strategic acquisition of the failed platform Quibi, has added some more intellectual property to its archives.

For Roku, it’s all about growth and expansion. Just this week Roku officially announced that it struck a partnership with SEMP TCL to bring Roku TCL televisions to Brazil. The consumer-friendly models should sell well in Brazil, a country with a population of over 200 million people. Brazil is also the second largest market for Netflix with over 18 million subscribers, which is always a good sign for Roku’s cross-platform compatibility. The streaming wars will continue to be waged over the next decade, and Roku is positioned to be the battlefield that streaming platforms compete on. 

Roku stock

The Bottom Line – Roku Stock Forecast

Like many retail brands, Roku is entering the crucial holiday quarter. In the second quarter of 2021, Roku saw a 117% year over year growth in revenues, and a 46% year over year rise in ARPU. Roku even predicts that these numbers should continue to grow into the future.

But even Roku warned its shareholders that the impending recovery from the pandemic is creating an uncertain operating environment for the streaming industry. Coupled with global supply chain shortages, Roku is predicting a slowdown in year over year comparisons for the end of 2021.

The information above is presented as factual information and is not financial advice nor does it constitute a recommendation. 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.

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