Roku Analyst: Streaming Stock Executing Well, With Attractive Valuation

Shares of video streaming equipment maker Roku Inc ROKU, which have rallied over 140% year-to-date, are poised for further upside, according to an analyst at BofA Securities.

The Roku Analyst: Ruplu Bhattacharya reiterated a Buy rating on Roku shares and increased the price target from $310 to $360.

The Roku Thesis: Roku is executing well against its strategy of driving scale, engagement and monetization, Bhattacharya said in a Friday morning note.

Roku is capable of growing its installed base with its TV OEMs and by increasing the penetration of the in-house operating system in the total number of smart TVs sold by each of these brands, the analyst said.

Related Link: Needham Sticks To Its Streaming War Stance: Buy Roku, Sell Netflix

BofA sees The Roku Channel as an important asset in the third quarter, with the company doubling the active account reach and increasing streaming hours faster than any other top 10 channel on the Roku platform.

Further growth is in the cards, as it still accounts for a small fraction of the average 3.6 hours streamed per day per active account, Bhattacharya said.

Monetized ad impression growth accelerated from the COVID-19-impacted 50% year-over-year growth in the second quarter to 90% in the third quarter, the analyst said. 

"First time advertiser clients more than doubled y/y in 3Q driven by performance marketers using the OneView platform, as well as advertisers focused on new products like incremental reach guarantees." 

The next catalyst for the stock could be the addition of HBO Max to the channel line-up if Roku and AT&T Inc. T/WarnerMedia can come to an agreement on terms, according to BofA. 

Valuation remains attractive compared to a set of high-growth SaaS companies, Bhattacharya said. 

ROKU Price Action: At last check, Roku shares were rising 0.69% to $324.22. 

Related Link: Roku's Fundamentals 'Remain Strong,' Analyst Says

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