What happened
Shares of Roku (ROKU +0.30%) have climbed as much as 5% to hit all-time highs today. A bearish Wall Street analyst increased his price target, and news of a new strain of COVID-19 that is circulating in the U.K. has spooked investors and boosted stay-at-home stocks.
So what
Morgan Stanley increased its price target on Roku shares from $150 to $200 while reiterating an underweight (equivalent to a sell) rating. Analyst Benjamin Swinburne has been pessimistic regarding Roku, believing that investors are currently overestimating the ultimate size of the company's total addressable market.
Image source: Roku.
While Roku has seen engagement soar on its video-streaming platform throughout the pandemic, Swinburne believes the stock's premium valuation compared to peers is unwarranted. The analyst had downgraded shares of Roku about a year ago (before the pandemic hit) due to concerns about decelerating revenue growth, and the stock has gained approximately 160% since then.
Now what
The price target adjustment comes a few days after Benchmark separately raised its price target from $300 to a Street-high $410, following the announcement that Roku had finally secured a distribution deal with AT&T's WarnerMedia for HBO Max.
A new mutated strain of COVID-19 that is even more infectious has rattled investors and overshadowed the positive news that Congress has agreed on a new $900 billion stimulus deal. While broad market indexes are experiencing volatility from the development, stay-at-home stocks that have benefited from the pandemic -- such as Roku -- are rising today.
