Shares of Roku ( ROKU -2.78% ) have already climbed 97% so far in 2020 but will surge to new all-time highs in the coming year.
That's according to Needham analyst Laura Martin. On Monday, Martin raised her price target on Roku's stock from $255 to $315 -- the highest among her Wall Street colleagues. Her new target represents potential gains for investors of roughly 20% over the stock's closing price on Friday of about $263.
Martin cited several catalysts that she expects will drive Roku's stock higher in the coming year. The acceleration of cord-cutting during the pandemic will likely drive more business to Roku's platform. The company also benefits from the growing adoption of connected TV. Martin pointed to roughly 43 million streaming-only homes in the U.S. and the increasing number of streaming devices in each household as catalysts for Roku's advertising business.
The analyst also noted the company's unique position in the streaming industry as a key driver. "Roku generates revenue from both AVOD [advertising-based video on demand] and SVOD [subscription video on demand]," Martin wrote. That "implies it is hedged regardless of which companies win the streaming wars."
Will Roku's stock price hit $315?
The evidence suggests that Martin is right on the money. In the third quarter, Roku reported revenue that grew 73% year over year, driven primarily by platform revenue that surged 78%. This segment is comprised of advertising, the Roku Channel, and licensing of the Roku operating system (OS) for smart TVs.
At the same time, Roku's active accounts climbed to 46 million, an increase of 43%, while the average revenue per user climbed 20%.
Given the impressive growth in these metrics, the potential for Roku shares to grow significantly from here is not only possible but likely. An increase of 20% over the coming year might end up being conservative.