Guggenheim: Roku Growth Story Has More Fuel

The case for turning incrementally positive on streaming video hardware and software company Roku Inc ROKU is based on its industry-leading platform and an attractive international growth opportunity, according to Guggenheim.

The Analyst

Michael Morris maintained a Buy rating on Roku's stock with a price target lifted from $119 to $170.

The Thesis

Roku will continue benefiting from the growth of streaming video, as it occupies a "rare position" of delivering a win-win-win-win arrangement with hardware manufacturers, consumers, content providers and advertisers, Morris said in a Wednesday note. (See his track record here.)

Roku's platform is able to satisfy each stakeholders' individual needs and is a key selling point for investors at a time when competition intensifies and Roku's stock valuation is elevated, the analyst said. 

Roku remains in the early innings of building out a global platform, he said. Most recently, the company announced an expanded partnership with Hisense to sell Roku-equipped TVs across Europe by the end of the year.

The company's strategy to focus on the global market is notable for three reasons, Morris said: 

• The growth of streaming video globally will outpace the U.S. over the next five to 10 years.
• Smart TV penetration outside of the U.S. remains low.
• Roku is able to demonstrate its advantages to content providers and original equipment manufacturers and generate value for everyone.

Guggenheim's revised $170 price target is based on five times 2024 platform segment sales of $3.4 billion and values the international business at $6 billion.

Price Action

Roku shares were down 10.23% at $135.12 at the time of publication Wednesday. 

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Photo courtesy of Roku.