One of Roku's (NASDAQ:ROKU) earliest and most accurate bulls is lifting her price target on the streaming video pioneer. Needham analyst Laura Martin is boosting her goal on the shares from $150 to a Street high of $200. This isn't the first time that she set the highest ceiling on Roku, as she was the first one at $150 when she established that as her target this summer.
Roku has done a lot of ceiling busting this year. The stock has soared nearly fivefold in 2019, making it the top gainer among companies commanding market caps north of $10 billion. Martin has been a steady bull on the shares since shortly after its 2017 IPO. Having an upbeat outlook on Roku wasn't fashionable at the time, and when she set a Street high of $50 on the stock later that year, the noted worrywarts at Citron Research blasted her bullish prognosis as irresponsible.
She's been right so far, and if things continue to go well for Roku and its shareholders, it wouldn't be a surprise if she's the one planting the flag on $250 as a price target at some point next year.
We're all streaming along
Needham's Martin is no longer a voice in the wilderness. There are plenty of market watchers who have hopped onto Roku's bullish bandwagon. It's still fitting that she chose to increase her price target a day after the stock surrendered 15% of its value following a Morgan Stanley downgrade.
The trends are unmistakably kind for Roku. Consumers are shifting away from traditional pay TV, leaning on their speedy internet connections to stream a widening gamut of content at lower price points than they were paying before. Roku's user base has expanded 36% over the past year to 32.3 million homes, and those viewers are spending more time cradling the Roku remote. Those accounts spent 10.3 billion hours streaming through Roku's hub in the third quarter, 68% more content than they consumed a year earlier. We're talking about nearly 3.5 hours of content per day for each user.
Roku doesn't charge for users to lean on its platform, making it a popular choice for streaming-television manufacturers. Its growing collection of hardware that slaps seamlessly onto any TV is priced aggressively, as Roku knows better than anyone how to cash in once it gets its foot in the door.
It generates platform revenue from selling advertising as well as collecting revenue when folks sign up for many of the thousands of streaming services available through its hub. Martin sees revenue from subscription video on demand (or SVOD) accelerating in the year ahead. Average revenue per user has risen 30% over the past year, and that's only going to keep growing as the inevitable shakeout among big-name services finds them paying up to generate leads through Roku.
Martin's price goal of $200 translates into 47% of upside from where the stock was on Tuesday morning at the time of her analyst update. This may seem dull for a stock that's almost a five-bagger in 2019, but it's still more than enough to likely beat the market again in 2020. Roku continues to be a top stock for investors, perched in the right place at the right time as the big winner in the streaming revolution. Martin has never set a ceiling that Roku hasn't cracked.